Basel Committee and its goal & Some important and frequently used Banking terms

What is Basel Committee? What are its goal?

In 1988, the Basel Committee on banking supervision introduced the Basel-I accord or the risk based capital requirements to deal with the weakness in the leverage ratio as a measure for solvency.
IT was the very first attempt to introduce the concept of minimum standards of capital adequacy.
Basel-I : Basel I addressed only one Credit Risk.
Basel-II norms : Unfortunately India could not fully implement this but it is now gearing up under the guidance from the Reserve Bank of India to implement it from 1st April 2009.
Basel II : Basle II addresses 3 major pillars / Risks.

Credit Risk – 60%
Market Risk – 25%
Operational Risk – 15%
Minimum capital to be maintained by banks under Basle II is 8%
Basel III norms are effective from 1st January 2013
RBI extended the timeline for full implementation of Basel III norms to 31st March 2019 instead of
31st March 2018.
Basel III proposes many new capital, leverage and liquidity standards to strengthen the
regulation, supervision and risk management of the banking sector.

• Camels : It is a supervisory rating system . It refers to Capital adequacy, Assets, Management Capability, Earnings appraisal, Liquidity (also called asset liability management) and Sensitivity(sensitivity to market risk, especially interest rate risk).
• Bounced Cheque :When the bank has not enough funds in the relevant account or the account holder requests that the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder.
• Core Banking Solution : The branches of a bank are connected to a central host, where online multiple delivery channels like ATM, ABB, Debit Card, Mobile Banking etc under one roof.
• EMI (Emulated Monthly Installment) : An equal amount repaid with the principal and interest amount of a loan on every month.
• Internet Banking : Online banking (or internet banking ) allows customers to conduct financial transactions on a secure website operated by the bank. Banks are using internet as a channel to deliver their service to their customers is referred to internet banking.
• Monetary Policy: The RBI issues monetary policy annually to control money supply in the economy and flow of credit by banks to control inflation. CRR, SLR, BANK Rate are the tools of monetary policy (recent monetary policy statement was released on 30th September 2014). Next will be on 2nd December 2014.
• Plastic Money : The payment system in mode of credit and other cards like debit card etc refers to plastic money.
• VAT (Value added tax): It is an indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit. All over the world, VAT is payable on the goods and services as they form a part of national GDP.