50 Banking Terms Explained Simply: CRR, SLR, NPA, CASA & More (Part 2)

Banking Taiyari Series, Part 2 of 5

Be honest. How many times have you read "CRR" or "NPA" and nodded as if you understood, while your brain quietly said, "I will google it later"? Almost every bank candidate does this. The result is a perfect score in memorizing and a blank face in the interview.

In Part 1, we built the foundation: what a bank is, what NRB does and how loans work. Today we decode 50 banking terms in plain language. For each one, you get a simple meaning and, where useful, a small memory trick. Read slowly, say each definition aloud in your own words, and you will own these terms forever.

Group 1: Money, Rates and Liquidity (Terms 1 to 10)

1. Inflation: The general rise in prices over time. If a plate of momo costs more this year than last year for the same quality, that is inflation. NRB's main job is to keep it under control.

2. Monetary policy: The plan NRB announces every year to manage money supply, interest rates and credit growth. Think of it as the weather forecast for banks.

3. Bank rate: The rate at which NRB lends to commercial banks. When it rises, borrowing becomes costly for banks, and they usually pass that cost to customers.

4. Repo rate: Repo means repurchase. A bank gives government securities to NRB, takes cash, and agrees to buy the securities back later at a higher price. The difference is the repo rate. It is a short-term borrowing tool for banks.

5. Reverse repo: The opposite. NRB takes money out of the system by taking cash from banks and giving securities temporarily. Memory trick: Repo = bank gets cash. Reverse repo = bank gives cash.

6. Interest rate corridor: A band with a ceiling and a floor for short-term rates. NRB lends at the upper limit and absorbs deposits at the lower limit, so market rates stay between them.

7. Base rate: The minimum lending rate of a bank, built from its cost of funds plus other costs. No loan should be priced below it. Customers then pay base rate plus a premium based on risk.

8. Interest spread: Lending rate minus deposit rate. It is the bank's basic margin. NRB sets a limit on the spread so banks do not overcharge.

9. Floating rate: An interest rate that changes with the market. Fixed rate stays the same for a period. Home loans in Nepal are often floating, which is why your EMI can change.

10. Liquidity: How quickly a bank can turn assets into cash to pay customers. A bank can be profitable and still fail if it runs out of liquid cash. That is why liquidity is treated as life support.

Group 2: Reserves and Capital Ratios (Terms 11 to 20)

11. CRR (Cash Reserve Ratio): A fixed share of deposits that banks must keep with NRB as cash. It earns little or nothing and cannot be lent out. Raise CRR and banks have less to lend.

12. SLR (Statutory Liquidity Ratio): Another fixed share of deposits kept in safe, liquid assets such as cash and government bonds. Think of CRR as money in NRB's locker and SLR as money in a safe place.

13. CD ratio: Credit to deposit ratio. If a bank collected Rs 100 and lent Rs 85, its CD ratio is 85 percent. Too high means a liquidity squeeze, too low means idle money.

14. CCD ratio: A Nepal-specific measure called credit to core capital cum deposit ratio. It compares loans against core capital plus deposits and was introduced to give banks a more realistic lending limit. Check the current limit in NRB's latest policy.

15. CAR (Capital Adequacy Ratio): A bank's capital divided by its risk-weighted assets. It shows how much cushion the bank has to absorb losses. A higher CAR means a safer bank.

16. Tier 1 capital: The strongest capital, mainly paid-up share capital and retained earnings. It is the bank's own real money.

17. Tier 2 capital: Supplementary capital like some reserves and subordinated debt. Useful, but weaker than Tier 1.

18. Basel norms: International rules from the Basel Committee on banking supervision. Basel III is the latest framework, asking banks to hold stronger capital and liquidity after the 2008 global crisis. NRB follows these standards in its own version.

19. Risk-weighted assets (RWA): Not all assets carry the same danger. A government bond is very safe, a business loan is riskier. RWA gives each asset a weight based on risk, then adds them up.

20. Core capital: The permanent capital a bank can rely on during stress. It sits at the heart of most NRB ratio limits.

Group 3: Loans and Asset Quality (Terms 21 to 34)

21. NPA (Non-Performing Asset): A loan on which the borrower has stopped paying interest or principal beyond a set period. It stops earning income and becomes a headache.

22. Loan loss provision: Money the bank sets aside from profit to cover expected losses on bad loans. The worse the loan class, the higher the provision.

23. Write-off: Removing a hopeless loan from the books. It does not mean the borrower is forgiven. The bank can still try to recover.

24. Collateral: Security pledged for a loan, such as land, buildings or fixed deposits. If the borrower fails, the bank can sell it.

25. Overdraft (OD): A facility that lets a business withdraw more than its balance up to a limit. Interest is charged only on the amount used.

26. Working capital loan: Short-term financing for day-to-day business needs like stock, salaries and bills.

27. Term loan: A loan repaid over a fixed period, usually for buying machinery, building a factory or similar long-term needs.

28. Moratorium (grace period): A period during which the borrower pays little or no principal. Common for projects that need time to start earning.

29. Rescheduling and restructuring: Changing a loan's repayment terms when the borrower faces temporary difficulty, instead of letting it turn bad.

30. CIB (Credit Information Bureau): The institution that keeps borrower credit history. A blacklisted borrower cannot easily take a new loan from any bank.

31. LTV (Loan to Value): The loan amount divided by the value of the asset. If a house is worth Rs 1 crore and the bank gives Rs 70 lakh, LTV is 70 percent. Lower LTV means safer lending.

32. Mortgage: A loan secured by immovable property. The property stays with you, but the bank holds a legal claim until repayment.

33. Hypothecation: A claim over movable assets such as stock or vehicles without taking possession. The business keeps using them.

34. Guarantor: A person who promises to repay if the borrower fails. A real responsibility, not a signature favor.

Group 4: Trade, Forex and Remittance (Terms 35 to 40)

35. Letter of Credit (LC): A bank's promise to pay an exporter on behalf of the importer, once the documents are correct. It builds trust between buyers and sellers who never met.

36. Bank guarantee: A promise from the bank to pay a third party if the customer fails to meet an obligation. Contractors often use it for tenders.

37. SWIFT: A global messaging network that banks use to send secure payment instructions. It sends messages, not actual money.

38. Exchange rate: The price of one currency in terms of another. Remember that the Nepali rupee is pegged to the Indian rupee.

39. Remittance: Money sent home by Nepalis working abroad. It is a major pillar of Nepal's economy and a major income source for banks through fees and exchange margins.

40. Correspondent bank: A foreign bank that handles transactions on behalf of a local bank, helping it reach countries where it has no branch.

Group 5: Compliance and Operations (Terms 41 to 50)

41. KYC (Know Your Customer): The process of verifying who the customer is, using ID, address proof and photos. Banks cannot open accounts for anonymous people.

42. AML (Anti-Money Laundering): Rules and systems to stop criminals from cleaning illegal money through the banking system.

43. CFT (Countering Financing of Terrorism): Controls to stop banks from being used to fund terrorism. Usually mentioned together as AML/CFT.

44. PEP (Politically Exposed Person): A person holding a prominent public position, along with close relatives. Banks apply extra checks because of higher corruption risk.

45. STR (Suspicious Transaction Report): A report a bank sends to the financial intelligence unit when a transaction looks suspicious, even if no crime is proven yet.

46. TTR (Threshold Transaction Report): A report for transactions that cross a set amount, regardless of suspicion.

47. CBS (Core Banking System): The central software that connects all branches so you can deposit in Kathmandu and withdraw in Biratnagar.

48. Clearing and interbank payment: The process by which banks settle cheques and transfers between each other. Systems like connectIPS make this near instant.

49. Bancassurance: A bank selling insurance products to its customers. The bank earns commission and the customer gets one-stop service.

50. Cheque dishonor: When a cheque bounces, usually for insufficient funds or signature mismatch. It can carry penalties and legal consequences.

How to Actually Remember These 50 Terms

1. Learn in groups, not alphabetically. The five groups above mirror how banks think: money, safety, loans, trade, compliance.
2. Teach someone. Explain CRR to a friend or family member without using the word "ratio." If they understand, you understand.
3. Use a real example for each term. Rs 100 deposit, Rs 85 loan, done. Numbers stick better than definitions.
4. Revise using spaced repetition. Review on Day 1, Day 3, Day 7 and Day 14.

Five Interview Questions on These Terms

Q1. Difference between CRR and SLR?
CRR is cash kept with NRB. SLR is a share of deposits kept in liquid assets like government bonds. Both control how much a bank can lend and keep the system safe.

Q2. What happens when NRB increases CRR?
Banks have less money to lend, credit becomes tighter, and interest rates tend to rise. This helps cool inflation.

Q3. Why is high NPA dangerous?
It reduces income, increases provisioning, weakens capital and damages public trust.

Q4. What is KYC and why is it important?
KYC verifies customer identity and protects the bank against fraud, money laundering and terrorism financing.

Q5. What does CAR tell us?
It tells us whether a bank has enough capital to absorb losses compared with the risk it carries.

Final Words

You just covered more banking vocabulary in one post than many candidates learn in a month. Do not try to master all 50 today. Pick ten, learn them well, and return for the next ten tomorrow. Slow and steady beats a late-night cram session every time.

In Part 3, we move from terms to real banking work: deposit products, loan products, remittance, cards and digital banking in Nepal, so you can talk about what a banker actually does all day.

Your turn: Which of these 50 terms was new to you? Drop it in the comments, and I will include a deeper example in a future post.

Frequently Asked Questions

How many banking terms should I know for a Nepal bank interview?
Around 50 to 80 core terms are enough for most entry-level interviews, if you can explain each one with a simple example.

Are CRR and SLR limits fixed forever?
No. NRB reviews them in its monetary policy and can change them, so always check the latest announcement.

Where can I find official definitions?
NRB directives, annual monetary policy documents and your target bank's annual report are the most reliable sources.