IMPORTANT BANKING AWARENESS

1) What do you mean by teaser rates?

A teaser rate means, a low introductory interest rate on an adjustable rate mortgage (ARM), generally in home loans. The lender though charges low interest rate initially he will charge the real interest rate subsequently. The lender in this case has to tell future rate of interest to the borrower and also its date of commencement. In other words, the home loans which are neither at fixed rate nor at floating are called teaser rates? In fact, it a technique to entice the borrowers who otherwise unable to qualify a mortgage home loan. In view of the higher risk associated with such loans, the standard asset provisioning on the outstanding amount has been increased from 0.40 per cent to 2 per cent with immediate effect. The provisioning on these assets would revert to 0.40 per cent after 1 year from the date on which the rates are reset at higher rates if the accounts remain standard.

2) IDRBT – Institute for development & Research in Banking Technology was set up by the RBI in 1996. The RBI formed a committee on "Technology Upgradation in the Payment Systems". The committee recommended a variety of payment applications

which can be implemented with appropriate technology upgradation and development of a reliable communication network. As a result of the committee's recommendations the institute was established in Hyderabad.

3) SMART CARDS – A smart card, chip card, or integrated circuit card (ICC), is in any pocket-sized card with embedded integrated circuits which can process data. This implies that it can receive input which is processed by way of the ICC applications and delivered as an output. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps some specific security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC. The card may embed a hologram to avoid counterfeiting. Using smartcards also is a form of strong security authentication for single sign-on within large companies and organizations.

4) OLTAS – Online tax accounting system is introduced to enable the customers to pay all their taxes in Bank itself, instead of going to the concerned departments like, Income Tax, Central Excise, Sales Tax etc. On the other hand this is an extra service and extra income to the banks. This type of income is called non-interesst income. Banks will earn around Rs 45/- per transaction from the concerned departments.

5) IRDA: A statutory body called the Insurance Regulatory Authority set up in 1996. Renamed as Insurance Regulatory and Development Authority with the passage of IRDA Act, 1999. Mr J Harinarayan is the present Chairman. The headquarters of IRDA is at Hyderabad.