Banking Jargon Decoded: 15 Key Terms You Should Know

Banking feels simple on the surface; deposit money, withdraw when needed, pay bills, or transfer funds. But anyone who has scrolled through an account statement or spoken to a bank representative knows that financial jargon has a way of sneaking into everyday banking. Terms like 'sweep-in facility' or 'dormant account' aren’t often explained, yet they can directly affect how much you earn, how much you pay, or even whether your account remains accessible.

Most account holders are familiar with basics like NEFT, RTGS, PAN, or KYC. But beyond these, there exists a layer of lesser-known terms that rarely make it to the spotlight. These terms matter precisely because they are less talked about, they’re the rules and processes that quietly shape your banking experience.

In this article, we decode 15 such lesser-known banking terms. From facilities that can quietly grow your savings to regulatory tools that could suddenly freeze your account, this guide will help you navigate the not-so-obvious side of banking.

1. Sweep-in

Banks know that most of us keep a cushion of funds in our bank account. With a sweep-in, that idle money doesn’t just sit there, it automatically moves to a fixed deposit (FD) once your balance crosses a set limit. For example, Ujjivan SFB’s Business Maxima Current Account comes with Sweep Smart, an auto-sweep facility that moves your surplus funds* (*T&C apply) to an FD. This way the idle money starts earning interest.

2. Moratorium

A moratorium is a temporary relief from loan repayments, usually offered during exceptional circumstances. Most account holders first heard of it during COVID-19, when RBI allowed banks to grant borrowers a break from paying EMIs.

Key point: A moratorium is a pause, not a waiver. Interest continues to accrue, which can increase your repayment burden later if not planned properly.

3. MCLR (Marginal Cost of Funds-Based Lending Rate)

Introduced in 2016, MCLR is the internal benchmark that Indian banks use to set interest rates for loans. It replaced the earlier base rate system and was meant to ensure faster transmission of RBI’s monetary policy.

Why it matters: 

If you have a home loan linked to MCLR, your EMI may change every reset period  depending on the bank’s cost of funds. For borrowers, it’s the reason your home loan interest rate doesn’t always move in sync with RBI’s repo announcements.

4. Repo-Linked Lending Rate (RLLR)

To make lending more transparent, RBI introduced RLLR, where loan rates are directly pegged to the RBI’s repo rate (the rate at which banks borrow from RBI).

Why it matters:

• If RBI cuts the repo rate, the bank may reduce the interest rate.
• But if RBI hikes rates, the interest rate may go up.

5. NEFT (National Electronic Funds Transfer)

NEFT is an electronic payment system that processes transactions in batches in specific times during banking hours. It operates on a deferred net settlement basis, meaning transactions are grouped and processed together rather than individually. It is ideal for non-urgent transfers and operates on weekdays and Saturdays.

6. RTGS (Real Time Gross Settlement)

As the name suggests, RTGS is a payment system where transactions are settled immediately and individually rather than in batches. RTGS is primarily used for high-value transactions, minimum ₹2 lakh, and provides instant settlement, making it suitable for immediate bulk payments.

7. IMPS (Immediate Payment Services)

If you’ve used net banking for transferring money to any individual, you must’ve used IMPS. It’s a 24/7 instant payment service that enables quick money transfers between banks. Unlike NEFT, IMPS works round the clock including holidays, making it ideal for emergency fund transfers.

8. IFSC (Indian Financial System Code)

It’s an 11-character alphanumeric code that uniquely identifies bank branches participating in electronic payment systems. The first 4 characters represent the bank, the 5th character is 0 or zero, and the last 6 characters identify the specific branch.
A haircut is the reduction applied by banks to the value of an asset offered as collateral. This ensures lenders are protected against market volatility.

9. Overdraft

Overdraft is a facility that allows account holders to withdraw more money than available balance, up to a set limit. Please note that not all accounts come with overdraft facilities. Also, please read the terms and conditions before applying for overdraft.

10. Nominee

A nominee is a person who acts as the custodian of funds in case of account holder’s death. A nominee is different from a legal heir – the latter being the designated person to inherit the funds of the deceased. It is highly recommended to add a nominee at the time of account opening to avoid legal hassles upon the account holder’s demise.

11. Dormant Account

Bank account with no customer-initiated transactions for 24 months or more are deemed as a dormant account. Reactivating the account requires a detailed process including KYC documentation.

12. Inactive Account

Bank-account with no customer-initiated transactions for more than 12 months but less than 24 months is deemed as an inactive account.  Unlike dormant account, you can reactivate an inactive account with a small transaction.

13. MICR (Magnetic Ink Character Recognition)

It’s a 9-digit code on cheques for automated processing. Read this blog to know about the functionalities and importance of MICR.

14. CRM (Cash Recycler Machine)

A cash-recycler machine is a self-servicing device that facilitates both cash deposit and withdrawal. CRMs can verify, accept and recycle cash in real time.

15. Cheque Bounce

A cheque that gets rejected by the bank is known as cheque bounce. The reasons for dishonoured or bounced cheque could be many including but not limited to insufficient funds, damaged cheque, signature mismatch, incorrect date, etc.