7th Feb Banking Term

Non Performing Assets (NPA): An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. The Duration of NPA declaration is of 90 days.

CTS (CHEQUE TRUNCATION SYSTEM) is basically an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch.

Bank Rate: The interest rate at which at central bank lends money to commercial banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Lower bank rates can help to expand the economy, when unemployment is high, by lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign in the economy, when inflation is higher than desired.