Banking Terminology and Confusing Concepts – Part 1

In this series of articles, we try to simplify the banking terminology and bring to light the key differences in confusing concepts.

Difference between TDR and STDR

TDR and STDR terms are different types of fixed deposits. TDR means Term Deposit and STDR means special term deposit. Following is main difference between them.

If you are interested on getting periodic payments from your fixed deposit after short period like week, month or quarterly, you have to deposit under TDR scheme. Bank will pay you normal interest rate on your fixed deposit as per the payout option chosen by you.

If you are not interested in getting periodic payments but looking for interest accrual and a bullet payment at the end of the term then you hav to opt for STDR. The advantage with this scheme is that it will be quarterly compounding. The interest is calculated on quarterly basis and at the end of each quarter the same get added to the principal. As a result, your yield to maturity will be higher.

As per my suggestion, if you are not bothered about when you want to receive interest then STDR is preferrable as yield is more than what you get in TDR.

Difference between Loans and Advances

Following are the major differences between loans and advances:

  1. Money lent by an entity to another entity for specific purposes is known as Loan. Money provided by the bank to entities for fulfilling their short term requirements is known as Advances.
  2. Loan is a kind of debt while Advances are credit facility granted to customers by banks.
  3. Loans are provided for long duration which is just opposite in the case of Advances.
  4. There are many legal formalities in case of loans as compared to advances.
  5. Loans can be secured or unsecured whereas Advances are generally secured by asset or by guarantee from a surety.


MT101 is a SWIFT code used for transferring funds. Typically, this is used by large corporates which have branches spread across the globe but wants to maintain a single or few accounts for doing all transactions.

This is more like a pool account mechanism where all the other banks upon receiving MT101 will transfer the balances in their account to common pool account. The company then will make payments from and receive remittances to common pool account.

In India, Banks offer auto sweep mechanism if company maintains various accounts spread across India. Every day, at a particular time, all the balances in linked accounts get transferred to common pool account.

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