Bank rate policy: Bank rate policy is the policy of Central Bank of controlling credits by increasing or

decreasing the bank rate.

Open market operation: The process of buying and selling securities and credit instruments from open
market by the Central Bank with a view to controlling credit is called open market operation.

Reserve rate variation policy: By increasing or decreasing reserved rate variation policy Central Bank
increases or decreases the capacity of commercial banks to extent credit.

Rationing policy: Rationing policy is the process of a particular objective where is highest limit of credit is
fixed for a particular sector for a fixed time in order to encourage or discourage that sector.

Credit creation: Credit creation is the process where banks do not keep cent per cent reserve against
deposits in order to meet the demands of depositors.

Money market: The money market is a component of the economy which provides short-term funds.

Capital market: Capital market is a financial system concerned with raising capital by dealing in shares,
bonds, and other long-term investments.

Bank rate: Bank rate is the rate of interest which a central bank charges on its loans and advances to a
commercial bank.

Current account: The account through which one can deposit or withdraw money everyday or every
week number of times is known as current account.

Savings account: The account which can be opened by depositing small amount of money is called
savings account.

Fixed deposit account: An account opened for a fixed period of time is called fixed deposit account.

Liquidity: The availability of liquid assets.

Liquid assets: Liquid assets are the reference to cash on hand or assets that can readily converted to
cash.

First line of defense: Balance with the other banks called the first line of defense.

Second line of defense: Money at call and short notice is the second line of defense.

CRR: CRR stands for Cash Reserve Ratio. It refers to the cash that banks have to maintain with the
central bank.

SLR: SLR stands for Statutory liquidity ratio which is the Government term for the reserve requirement
that commercial banks are required to maintain in the form of cash, gold reserves, bonds and Central
Bank approved securities before providing credit to the customers.
Money at call and short notice: It is the second most liquid asset of a Banker which means collection of
funds overnight or within a short period.

5c's: Character, capacity, capital, conditions, collateral.

Cash credit: it is an agreement by which a Banker allows his customer to borrow money up to a certain
limit against security of goods.

Overdraft: When a current account holder is permitted by the banker to draw more than what stands to
his credit such an advance is called overdraft.

Loan: Loan is a system where credit is given for a definite purpose and for a predetermined period.

Bridge loan: Bridge loans are short term loans which are granted industrial undertakings to meet their
urgent and essential needs.

Composite loan: When a loan is granted for both buying capital assets and working capital purposes is
called composite loan.

Consortium advance: whose credit needs are met by two or more banks jointly in proportion to their
capacity.

Multiple banking: Multiple Banking is a banking where a borrowal avails of finance independently from
more than one bank.

Letter of credit: A letter issued by a bank to another bank to serve as a guarantee for payments made to
a specified person under specified conditions.

Types of letter of credit and their meaning:

1.Commercial LC
2.Export/Import LC
3.Transferable LC
4. Untransferlable LC
5. Revocable LC
6. Irrevocable LC
7. Standby LC
8. Confirmed LC
9. Unconfirmed LC
10. Revolving LC
11. Back to back LC
12. Red clause LC
13. Green clause LC

Modes of investment in Islamic Bank their meaning:

i) Bai Murabaha (sale on agreed upon profit)
ii) Bai Muajjal (sale on deferred payment basis)
iii) Bai Salam (purchase of goods on deferred delivery basis)
iv) Bai Istisna'a
v) Mudaraba
vi) Musharaka
vii) Hpsm (hire purchase under Shirkatul Melk- share in ownership)