BANKING TERMINOLOGY DEFINITIONS FOR PO INTERVIEW -1

Negotiable instruments- an instrument which contains the feature of negotiability is known as a negoitable instrument.In business sense it is the credit instrument which can be transferred from one person to another in settlement of debts or settlement of trade transactions. The negotiation of such instrument can be by delivery and endorsement. Section 13 of Negotiable Instrument Act defines it as "a negotiable instrument means a promissory note , bill of exchange and cheque payable either to order or to bearer

Bill of exchange-A bill of exchange, popularly known as a bill, as defined under sec 5 of the Indian Negotiable Instrument Act means, "an instrument in writing containing an unconditional order, signd by the maker, directing a certain person to pay a certain sum of money only to, or order of a certain person, or to the bearer of the instrument." Features-1. A bill of exchange must be in writting. 2. It must contain an order(and not a request) to make a payment. 3. The order must be unconditional. 4. The amount of bill of exchange must be definite. 5. The date of payment must be a fixed one. 6. It must be signed by the maker(drawer) of the bill. 7. It must be signed by the acceptor(drawee)

Promissory Note- PN is a written promise made by one person to pay certain sum of money due to another person or any other legal-holder of the document. According to Indian Negotiable Instrument Act, " A Promissory Note is an instrument in writing(not being a bank note or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money to, or to the order of, a certain person." Features- 1. It must be in writing. 2. There must be a promise to pay a certain sum of money in it. 3.The amount to be paid must be specified(definite). 4. It must be signed by the maker or promisor. 5.The name of the payee must be mentioned in it. 6.the pn cannot be made payable to a bearer.

Bank's Liabilities

 Bank's liabilities constitute five major items. The share capital, the contribution which shareholders have contributed for starting the bank. Reserve funds are the money, which the bank has accumulated over the years from its undistributed profits. Deposits are the money owned by customers and therefore it is a liability of a bank. There can be various kinds of deposits and recurring deposits. Apart from these items a bank can borrow from central and other commercial banks. These borrowings are also treated as bank's liabilities.

Bank's Assets

 Bank's assets comprises cash, money at short notice, bills and securities discounted, bank's investments, loans sanctioned by the bank, etc. Bank's cash in hand, cash with other banks and cash with central bank (RBI) are its assets. When a bank makes money available at short notice to other banks and financial institutions for a very short period of 1-14 days it is also treated as bank's asset. Apart from these items bank always make money available to people on the form of loans and advances. They are also become bank's assets.