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Dr. Ram Mehar Arya


BANKING GLOSSARY
Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank
customers for resolution of complaints relating to certain services rendered by banks. The
Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation
Act, 1949 by RBI with effect from 1995.The Banking Ombudsman is a senior official
appointed by the Reserve Bank of India to redress customer complaints against deficiency in
certain banking services. As on date; fifteen Banking Ombudsmen have been appointed with
their offices located mostly in state capitals.
Capital fund: Equity contribution of owners. The basic approach of capital adequacy
framework is that a bank should have sufficient capital to provide a stable resource to absorb
any losses arising from the risks in its business. Capital is divided into different tiers
according to the characteristics / qualities of each qualifying instrument. For supervisory
purposes capital is split into two categories: Tier I and Tier II.
Tier-1 capital: A term used to refer to one of the components of regulatory capital. It
consists mainly of share capital and disclosed reserves (minus goodwill, if any). Tier I items
are deemed to be of the highest quality because they are fully available to cover losses Hence
it is also termed as core capital.

Tier-II Capital Refers to one of the components of regulatory capital. Also known as
supplementary capital, it consists of certain reserves and certain types of subordinated debt.
Tier II items qualify as regulatory capital to the extent that they can be used to absorb losses
arising from a bank's activities. Tier II's capital loss absorption capacity is lower than that of
Tier I capital.
PFRDA (PENSION FUND REGULATORY DEVELOPMENT AUTHORITY) was
established by Government of India on 23
rd
August, 2003. The Government has, through an
executive order dated 10
th
October 2003, mandated PFRDA to act as a regulator for the
pension sector. The mandate of PFRDA is development and regulation of pension sector in
India
Real Time Gross Settlement (RTGS) System: RTGS is a funds transfer systems where
transfer of money takes place from one bank to another on a "real time" and on "gross" basis.
Settlement in "real time" means payment transaction is not subjected to any waiting period.
"Gross settlement" means the transaction is settled on one to one basis without bunching or
netting with any other transaction. Once processed, payments are final and irrevocable. This
was introduced in 2004 and settles all inter-bank payments and customer transactions above
` 2 lakh.
NPS (NEW PENSION SCHEME) is a new contributory pension scheme introduced by
the Central Government for its own new employees. Under the new pension system, each
new central government employee will open a personal retirement account on joining

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service. Every month, and till the employee retires or leaves government service, a part of the
employee's salary will be transferred into this account. When the person retires, he will be
able to use these savings to take care of the needs and expenses of his family during old age.
Beneficial owner Account (B.O. account) / Demat Account: It is an account opened
with a depository participant in the name of client for the purpose of holding and
transferring securities.

Trading Account: An account which is opened by the broker in the name of the respective
investor for the maintenance of transactions executed while buying and selling of securities.

Client Account / Bank Account: A bank account which is in the name of the respective
client and is used for debiting or crediting money for trading in the securities market.
The Regional Rural Banks (RRBs) were established with a view to developing the rural
economy by providing, for the purpose of development of agriculture, trade, commerce,
industry and other productive activities in the rural areas, credit and other facilities,
particularly to small and marginal farmers, agricultural labourers, artisans and small
entrepreneurs, and for matters connected therewith
National Electronic Funds Transfer (NEFT) System In November 2005, a more
secure system was introduced for facilitating one-to-one funds transfer requirements of
individuals / corporate. Available across a longer time window, the NEFT system provides
for batch settlements at hourly intervals, thus enabling near real-time transfer of funds.
Certain other unique features viz. accepting cash for originating transactions, initiating
transfer requests without any minimum or maximum amount limitations, facilitating one-
way transfers to Nepal, receiving confirmation of the date / time of credit to the account of
the beneficiaries, etc., are available in the system
Equity share, commonly referred to as ordinary share also represents the form of
fractional ownership in which a shareholder, as a fractional owner, undertakes the maximum
entrepreneurial risk associated with a business venture. The holders of such shares are
members of the company and have voting rights.
Credit rating agency is an entity which assesses the ability and willingness of the issuer
company for timely payment of interest and principal on a debt

Yield refers to the percentage rate of return paid on a stock in the form of dividends, or the
effective rate of interest paid on a bond or note. There are many different kinds of yields
depending on the investment scenario and the characteristics of the investment. The yield on
the government securities is influenced by various factors such as level of money supply in
the economy, inflation, future interest rate expectations, borrowing program of the
government & the monetary policy followed by the government.

Yield to Maturity (YTM) is the most popular measure of yield in the Debt Markets and is
the percentage rate of return paid on a bond, note or other fixed income security if you buy
and hold the security till its maturity date.

Clean Price and the Dirty Price in reference to trading in G-Securities. G-Secs are traded
on a clean price (Trade price) but settled on the dirty price (Trade price + Accrued Interest).
This happens, as the coupon payments are not discounted in the price, as is the case in the
other non-govt. debt instruments.

Bank Draft Bankers draft is a negotiable claim drawn upon a bank. Drafts are as good as
cash. The drafts cannot be returned and unpaid.

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Bank Rate Bank rate is the rate of discount at which the central bank of the country
discounts first class bills. It is the rate of interest at which the central bank lends money to
the lower banking institutions. Bank rate is a direct quantitative method of credit control in
the economy.

Commercial Bill- it is a bill of exchange drawn by the creditor on the debtor when the
debtors acceptance is obtained the paper becomes the bill of exchange.

Commercial Bank Commercial bank is an institution of finance. It deals with the
banking services through its branches in whole of the country operation of current accounts,
deposits, granting of loans to individuals and companies etc. are various functions of the
commercial bank

Clearing Bank Clearing Bank is one which settles the debits and credits of the
commercial banks. Sometimes back number of transactions in the bank is large in number
and due to lack of technology these banks came into purview. Now the bank performs these
functions itself.
NAV (Net asset value) The performance of a particular scheme of a mutual fund is
denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the
investors in securities markets. In simple words, Net Asset Value is the market value of the
securities held by the scheme. Since market value of securities changes every day, NAV of a
scheme also varies on day to day basis. The NAV per unit is the market value of securities of
a scheme divided by the total number of units of the scheme on any particular date. For
example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the
mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit
of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis -
daily or weekly - depending on the type of scheme.

Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for
subscription and repurchase on a continuous basis. These schemes do not have a fixed
maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices which are declared on a daily basis. The key feature of open-end schemes is
liquidity.

Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity
period e.g. 5-7 years. The fund is open for subscription only during a specified period at the
time of launch of the scheme. Investors can invest in the scheme at the time of the initial
public issue and thereafter they can buy or sell the units of the scheme on the stock
exchanges where the units are listed. In order to provide an exit route to the investors, some
close-ended funds give an option of selling back the units to the mutual fund through
periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor i.e. either repurchase facility or through listing on
stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.
Soiled note: means a note which, has become dirty due to usage and also includes a two
piece note pasted together wherein both the pieces presented belong to the same note, and
form the entire note.
Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and
promise clause, Ashoka Pillar Emblem and RBI Governor's signature are printed in intaglio
i.e. in raised prints in Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000 banknotes.

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Mutilated banknote is a banknote, of which a portion is missing or which is composed of
more than two pieces.
Imperfect banknote means any banknote, which is wholly or partially, obliterated,
shrunk, washed, altered or indecipherable but does not include a mutilated banknote.
Banking can be defined as the business activity of accepting and safeguarding money
owned by other individuals and entities, and then lending out this money in order to earn a
profit. However, with the passage of time, the activities covered by banking business have
widened and now various other services are also offered by banks. The banking services
these days include issuance of debit and credit cards, providing safe custody of valuable
items, lockers, ATM services and online transfer of funds across the country / world
Bank we can say that Bank is a financial institution that undertakes the banking activity. It
accepts deposits and then lends the same to earn certain profit.
Commodity market: These allow trading of various types of commodities including
agriculture commodities and precious metals etc.
Derivative Market: provides trading of instruments which help in controlling financial
risk;
Foreign Exchange Markets: This market facilitates trading of foreign exchange or
trading of popular currencies of the world.
American Depository Receipts popularly known as ADRs were introduced in the
American market in 1927. ADR is a security issued by a company outside the U.S. which
physically remains in the country of issue, usually in the custody of a bank, but is traded on
U.S. stock exchanges. In other words, ADR is a stock that trades in the United States but
represents a specified number of shares in a foreign corporation.

Capital Expenditure:- The total expenditure by the government on acquiring any asset
that may include investment in shares, machinery, building or land. The scope of capital
expenditure extends to payments, advancements or loans that are approved or sanctioned to
the State governments, union territories, public sector undertakings by the Central
government.

Budget Deficit: - When the expenditure becomes more than revenues, then the budgetary
exercise is considered a failure as there is shortage of funds. Such a situation is said to be a
'Budget Deficit'.

Contingency Fund: - The fund that is used by the government in order to meet the
unforeseen expenditure or in case to meet emergencies. The contingency fund is generally
used when the government cannot wait for long for the parliament to authorise the expenses
on the expenditure.

Disinvestment: -Government makes a number of investments in public sector
undertakings. But when it dilutes its stake in these undertakings, it is defined as
disinvestment.

Soft loan: A loan with a below-market rate of interest. Loans made by multinational
development banks and the World Bank to developing countries. Typically, soft loans have
extended grace periods in which only interest or service charges are due. They also offer
longer amortization schedules and lower interest rates than conventional bank loans.

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Demand Draft is a pre-paid Negotiable Instrument, wherein the drawee bank undertakes
to make payment in full when the instrument is presented by the payee for payment. The
demand draft is made payable on a specified branch of a bank at a specified centre. In order
to obtain payment, the beneficiary has to either present the instrument directly to the branch
concerned or have it collected by his / her bank through the clearing mechanism

Indian Depository Receipts: SEBI has issued guidelines for foreign companies who wish
to raise capital in India by issuing Indian Depository Receipts. Thus, IDRs will be
transferable securities to be listed on Indian stock exchanges in the form of depository
receipts. Such IDRs will be created by a Domestic Depositories in India against the
underlying equity shares of the issuing company which is incorporated outside India.

Check Truncation: The conversion of data on a check into an electronic image after a
check enters the processing system. Check truncation eliminates the need to return cancelled
checks to customers.

Power of Attorney: A written instrument which authorizes one person to act as another's
agent or attorney. The power of attorney may be for a definite, specific act, or it may be
general in nature. The terms of the written power of attorney may specify when it will expire.
If not, the power of attorney usually expires when the person granting it dies.

Depository Receipts are a type of negotiable (transferable) financial security,
representing a security, usually in the form of equity, issued by a foreign publicly-listed
company. However, DRs are traded on a local stock exchange though the foreign public
listed company is not traded on the local exchange. Thus, the DRs are physical certificates,
which allow investors to hold shares in equity of other countries. These types of instruments
first started in USA in late 1920s and are commonly known as American depository receipt
(ADR). Later on these have become popular in other parts of the world also in the form of
Global Depository Receipts (GDRs). Some other common types of DRs are European DRs
and International DRs. In nut shell we can say ADRs are typically traded on a US national
stock exchange, such as the New York Stock Exchange (NYSE) or the American Stock
Exchange, while GDRs are commonly listed on European stock exchanges such as the
London Stock Exchange. Both ADRs and GDRs are usually denominated in US dollars, but
these can also be denominated in Euros.

Balanced Fund The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. These are appropriate for investors looking for moderate growth.
They generally invest 40-60% in equity and debt instruments. These funds are also affected
because of fluctuations in share prices in the stock markets. However, NAVs of such funds
are likely to be less volatile compared to pure equity funds.
Derivative instruments A derivative is an instrument whose value is derived from the
value of one or more underlying, which can be commodities, precious metals, currency,
bonds, stocks, stocks indices, etc. Four most common examples of derivative instruments are
Forwards, Futures, Options and Swaps.
Forward contracts A forward contract is a customized contract between two parties,
where settlement takes place on a specific date in future at a price agreed today. They are
bilateral contracts and hence exposed to counter-party risk. Each contract is custom
designed, and hence is unique in terms of contract size, expiration date and the asset type
and quality. The contract price is generally not available in public domain. The contract has
to be settled by delivery of the asset on expiration date. In case, the party wishes to reverse

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the contract, it has to compulsorily go to the same counter party, which being in a monopoly
situation can command the price it wants.
Futures are exchange-traded contracts to sell or buy financial instruments or physical
commodities for Future delivery at an agreed price. There is an agreement to buy or sell a
specified quantity of financial instrument/ commodity in a designated Future month at a
price agreed upon by the buyer and seller. To make trading possible, the exchange specifies
certain standardized features of the contract.
Depository can be compared to a bank. A depository holds securities (like shares,
debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides
holding securities, a depository also provides services related to transactions in securities.

Dematerialization is a process by which physical certificates are converted into electronic
form.

Rematerialisation is the process of converting securities held in a demat account in
electronic form back in physical certificate form.

Beneficial Owner (BO) When physical shares are converted in to electronic form, the
depository becomes Registered owner in the books of the company and investors name is
removed from books of the company. Depository is holding shares in its records on behalf of
the investors who have opened a demat account with the depository. Hence all benefits are
given to the actual investor who is called as a Beneficial Owner (BO) of the securities.

Depository Participant (DP) is an agent of the depository who is authorized to offer
depository services to investors. Financial institutions, banks, custodians and stockbrokers
complying with the requirements prescribed by SEBI/ Depositories can be registered as DP.
Pledge is an activity of taking loan against securities by the investor. The investor is called
as pledgor and his entity who is giving the loan against the securities is called as pledgee.

Cost-push inflation occurs when the price of inputs increases. Businesses must acquire
raw materials, labour, energy, and capital to operate. If the price of these were to rise, it
would reduce the ability of producers to generate output because their unit cost of
production had increased. If these increases in production cost are relatively large and
pervasive, the effect is to simultaneously create higher inflation, reduce real GDP, and
increase the unemployment rate.

Demand-pull inflation occurs when spending on goods and services drives up prices.
Demand-pull inflation is fueled by income, so efforts to stop it involve reducing consumer's
income or giving consumers more incentive to save than to spend. Demand-pull inflation
persists if the public or foreign sector reinforces it. Low taxes and profligate government
spending exacerbate demand-pull inflation. A failure of the central bank to reign in the
money supply also makes the demand-pull inflation worse.

Hyperinflation If government spending is financed by printing currency or by the central
bank monetizing the debt, demand-pull inflation can become hyperinflation. Hyperinflation
is defined as annual inflation of 100% or greater. All cases of hyperinflation have been
accompanied by the government or central bank issuing too much money.

Stagflation: A condition of slow economic growth and relatively high unemployment - a
time of stagnation - accompanied by a rise in prices, or inflation. Stagflation occurs when the

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economy isn't growing but prices are; which is not a good situation for a country to be in.
This happened to a great extent during the 1970s, when world oil prices rose dramatically,
fueling sharp inflation in developed countries. For these countries, including the U.S.,
stagnation increased the inflationary effects.

Stagnation A period of little or no growth in the economy. Economic growth of less than 2-
3% is considered stagnation. Sometimes used to describe low trading volume or inactive
trading in securities. A good example of stagnation was the U.S. economy in the 1970s.

Stamp duty The tax placed on legal documents usually in the transfer of assets or property.
Where enforced, this tax is placed on the transfer of homes, buildings, copyrights, land,
patents and securities. The transfer of documents in locations where this law exists is only
legally enforceable once they are stamped, which shows the amount of tax paid.

Duty A tax levied on certain goods, services or transactions. Duties are enforceable by law
and are imposed on commodities or financial transactions, instead of individuals. The
obligation of a person in authority, such as a fiduciary, to fullfil the responsibilities of his or
her position
Non Resident Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign National of
Indian Origin resident outside India for purposes of employment, carrying on business or
vocation in circumstances as would indicate an intention to stay outside India for an
indefinite period. An individual will also be considered NRI if his stay in India is less than
182 days during the preceding financial year.
Money Market: Money market is a market for debt securities that pay off in the short term
usually less than one year, for example the market for 90-days treasury bills. This market
encompasses the trading and issuance of short term non equity debt instruments including
treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.
Capital Market: Capital market is a market for long-term debt and equity shares. In this
market, the capital funds comprising of both equity and debt are issued and traded. This also
includes private placement sources of debt and equity as well as organized markets like stock
exchanges. Capital market can be further divided into primary and secondary markets.
Debentures: Bonds issued by a company bearing a fixed rate of interest usually payable
half yearly on specific dates and principal amount repayable on particular date on
redemption of the debentures. Debentures are normally secured / charged against the asset
of the company in favour of debenture holder.
Bonus Shares: Shares issued by the companies to their shareholders free of cost by
capitalization of accumulated reserves from the profits earned in the earlier years.
A broker is a member of a recognized stock exchange, who is permitted to do trades on the
screen-based trading system of different stock exchanges. He is enrolled as a member with
the concerned exchange and is registered with SEBI.
Stock Plain and simple, a stock is a share in the ownership of a company. A stock
represents a claim on the company's assets and earnings. Holding a company's stock means
that you are one of the many owners (shareholders) of a company and, as such, you have a
claim to everything the company owns.
Arbitration is an alternative dispute resolution mechanism provided by a stock exchange
for resolving disputes between the trading members and their clients in respect of trades
done on the exchange.
Margin Trading is trading with borrowed funds/securities. It is essentially a leveraging
mechanism which enables investors to take exposure in the market over and above what is

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possible with their own resources. SEBI has been prescribing eligibility conditions and
procedural details for allowing the Margin Trading Facility from time to time.
Convertible Bond: A bond giving the investor the option to convert the bond into equity at
a fixed conversion price.
ASBA means Application Supported by Blocked Amount. ASBA is an application
containing an authorization to block the application money in the bank account, for
subscribing to an issue. If an investor is applying through ASBA, his application money shall
be debited from the bank account only if his/her application is selected for allotment after
the basis of allotment is finalized, or the issue is withdrawn/failed.
Day trading refers to buying and selling of securities within the same trading day such that
all positions will be closed before the market close of the trading day. In the Indian securities
market only retail investors are allowed to day trade.
SCSB (Self Certified Syndicate Banks) is a bank, which is recognized as a bank capable
of providing ASBA services to its customers.
Direct Market Access (DMA) is a facility which allows brokers to offer clients direct
access to the exchange trading system through the brokers infrastructure without manual
intervention by the broker. Some of the advantages offered by DMA are direct control of
clients over orders, faster execution of client orders, reduced risk of errors associated with
manual order entry, greater transparency, increased liquidity, lower impact costs for large
orders, better audit trails and better use of hedging and arbitrage opportunities through the
use of decision support tools / algorithms for trading. Presently, DMA facility is available for
institutional investors.
Securities Transaction Tax (STT) is a tax being levied on all transactions done on the
stock exchanges at rates prescribed by the Central Government from time to time. Pursuant
to the enactment of the Finance (No.2) Act, 2004, the Government of India notified the
Securities Transaction Tax Rules, 2004 and STT came into effect from October 1, 2004.
Investor Protection Fund is the fund set up by the Stock Exchanges to meet the
legitimate investment claims of the clients of the defaulting members that are not of
speculative nature. SEBI has prescribed guidelines for utilisation of IPF at the Stock
Exchanges. The Stock Exchanges have been permitted to fix suitable compensation limits, in
consultation with the IPF/CPF Trust. It has been provided that the amount of compensation
available against a single claim of an investor arising out of default by a member broker of a
Stock Exchange shall not be less than Rs. 1 lakh in case of major Stock Exchanges viz., BSE
and NSE, and Rs. 50,000/- in case of other Stock Exchanges.
Electronic Funds Transfer (EFT) This retail funds transfer system introduced in the
late 1990s enabled an account holder of a bank to electronically transfer funds to another
account holder with any other participating bank. Available across 15 major centers in the
country, this system is no longer available for use by the general public, for whose benefit a
feature-rich and more efficient system is now in place, which is the National Electronic
Funds Transfer (NEFT) system.
Mobile Banking System Mobile phones as a medium for providing banking services have
been attaining increased importance. Reserve Bank brought out a set of operating guidelines
on mobile banking for banks in October 2008, according to which only banks which are
licensed and supervised in India and have a physical presence in India are permitted to offer
mobile banking after obtaining necessary permission from Reserve Bank. The guidelines
focus on systems for security and inter-bank transfer arrangements through Reserve Bank's
authorized systems. On the technology front the objective is to enable the development of
inter-operable standards so as to facilitate funds transfer from one account to any other
account in the same or any other bank on a real time basis irrespective of the mobile network
a customer has subscribed to.

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Oversight of Payment and Settlement Systems Oversight of the payment and
settlement systems is a central bank function whereby the objectives of safety and efficiency
are promoted by monitoring existing and planned systems, assessing them against these
objectives and, where necessary, inducing change. By overseeing payment and settlement
systems, central banks help to maintain systemic stability and reduce systemic risk, and to
maintain public confidence in payment and settlement systems. The Payment and
Settlement Systems Act, 2007 and the Payment and Settlement Systems Regulations, 2008
framed there under, provide the necessary statutory backing to the Reserve Bank of India for
undertaking the Oversight function over the payment and settlement systems in the country.
Over the counter market In this market, a participant, who wants to buy or sell a
government security, may contact a bank / Primary Dealer / financial institution either
directly or through a broker registered with SEBI and negotiate for a certain amount of a
particular security at a certain price. Such negotiations are usually done on telephone and a
deal may be struck if both counterparties agree on the amount and rate. In the case of a
buyer, like an urban co-operative bank wishing to buy a security, the bank's dealer (who is
authorized by the bank to undertake transactions in Government Securities) may get in
touch with other market participants over telephone and obtain quotes.
Offshore Banking Unit (OBU) of a bank is a deemed foreign branch of the parent bank
situated within India, and shall undertake International Banking business involving foreign
currency denominated assets and liabilities.
Depository is an organization where the securities of a shareholder are held in the
electronic form. This is done at the request of the shareholder through the medium of a
Depository Participant (DP). A depository is similar to a Bank. If an Investor wants to utilize
the services offered by a depository, he/she has to open an account with the depository
through a DP.
ECS (electronic clearing service) is a mode of electronic funds transfer for transactions
that are repetitive and periodic in nature. ECS is used by institutions for making bulk
payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for
bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections,
loan instalment repayments, periodic investments in mutual funds, etc. Essentially, ECS
facilitates bulk transfer of monies from one bank account to many bank accounts or vice
versa using the services of a ECS Centre at a ECS location.


ECS Credit is used for affording credit to a large number of beneficiaries having accounts
with bank branches at various locations within the jurisdiction of a ECS Centre by raising a
single debit to an account of a bank (that maintains the account of the user institution). ECS
Credit enables payment of amounts towards distribution of dividend, interest, salary,
pension, etc., of the user institution.


ECS Debit is used for raising debits to a large number of accounts maintained with bank
branches at various locations within the jurisdiction of a ECS Centre for single credit to an
account of a bank (that maintains the account of the user institution). ECS Debit is useful for
payment of telephone / electricity / water bills, cess / tax collections, loan instalment
repayments, periodic investments in mutual funds, etc., that are periodic or repetitive in
nature and payable to the user institution.

MICR is an acronym for Magnetic Ink Character Recognition. The MICR Code is a numeric
code that uniquely identifies a bank-branch participating in the ECS Credit scheme. This is a
9 digit code to identify the location of the bank branch; the first 3 characters represent the

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city, the next 3 the bank and the last 3 the branch. The MICR Code allotted to a bank branch
is printed on the MICR band of cheque leaves issued by bank branches.

PIN (personal identification number) is a unique 4 digit number that allows you to
access your account through Debit Card at ATMs. For safety, your PIN should always be kept
completely confidential and your card too should remain in your possession and not to be
handed over to anyone else. Neither writes PIN on the Back of the Debit card nor Keep Debit
Card along with PIN.
Debit Card provides access to ATMs for cash withdrawals, balance enquiries and mini
statement, on-line electronic payment for purchases from your savings / current (individual)
accounts. You can also transfer funds through ATM to your own / other accounts and also
transfer / receive funds to / from any MasterCard or Maestro card holder (Debit or Credit
card) of other selected banks.
OMOs (open market operations) are the market operations conducted by the Reserve
Bank of India by way of sale/ purchase of Government securities to/ from the market with an
objective to adjust the rupee liquidity conditions in the market on a durable basis. When the
RBI feels there is excess liquidity in the market, it resorts to sale of securities thereby sucking
out the rupee liquidity. Similarly, when the liquidity conditions are tight, the RBI will buy
securities from the market, thereby releasing liquidity into the market.
The Banking Codes and Standard Board of India (BCSBI) constituted a Working
Group comprising members from select banks, Indian Banks Association, Rural Planning &
Credit Department of Reserve Bank of India to formulate a Banking Code for SME
Customers. On the basis of discussions with Industry Associations, banks, SIDBI and
Government agencies, The Banking Codes and Standard Board of India (BCSBI) has
formulated a Code of Bank's Commitment to Micro and Small Enterprises. This is a
voluntary Code, which sets minimum standards of banking practices for banks to follow
when they are dealing with Micro and Small Enterprises (MSEs) as defined in the Micro
Small and Medium Enterprises Development (MSMED) Act, 2006
Sick unit As per the extant guidelines, a unit is considered as sick when any of the borrowal
account of the unit remains substandard for more than 6 months or there is erosion in the
net worth due to accumulated cash losses to the extent of 50% of its net worth during the
previous accounting year and the unit has been in commercial production for at least two
years. The criteria will enable banks to detect sickness at an early stage and facilitate
corrective action for revival of the unit.
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a
promissory note. It was introduced in India in 1990. It was introduced in India in 1990 with
a view to enabling highly rated corporate borrowers to diversify their sources of short-term
borrowings and to provide an additional instrument to investors. Subsequently, primary
dealers and all-India financial institutions were also permitted to issue CP to enable them to
meet their short-term funding requirements for their operations

KYC is an acronym for Know your Customer, a term used for customer
identification process. It involves making reasonable efforts to determine true identity and
beneficial ownership of accounts, source of funds, the nature of customers business,
reasonableness of operations in the account in relation to the customers business, etc which
in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines

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is to prevent banks being used, intentionally or unintentionally by criminal elements for
money laundering.
A Government security is a tradable instrument issued by the Central Government or the
State Governments. It acknowledges the Governments debt obligation. Such securities are
short term (usually called treasury bills, with original maturities of less than one year) or
long term (usually called Government bonds or dated securities with original maturity of one
year or more). In India, the Central Government issues both, treasury bills and bonds or
dated securities while the State Governments issue only bonds or dated securities, which are
called the State Development Loans (SDLs). Government securities carry practically no risk
of default and, hence, are called risk-free gilt-edged instruments. Government of India also
issues savings instruments (Savings Bonds, National Saving Certificates (NSCs), etc.) or
special securities (oil bonds, Food Corporation of India bonds, fertiliser bonds, power bonds,
etc.). They are, usually not fully tradable and are, therefore, not eligible to be SLR securities.
Gilt funds, as they are conveniently called, are mutual fund schemes floated by asset
management companies with exclusive investments in government securities. The schemes
are also referred to as mutual funds dedicated exclusively to investments in government
securities. Government securities mean and include central government dated securities,
state government securities and treasury bills. The gilt funds provide to the investors the
safety of investments made in government securities and better returns than direct
investments in these securities through investing in a variety of government securities
yielding varying rate of returns gilt funds, however, do run the risk.. The first gilt fund in
India was set up in December 1998.
Treasury bills or T-bills, which are money market instruments, are short term debt
instruments issued by the Government of India and are presently issued in three tenors,
namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no
interest. They are issued at a discount and redeemed at the face value at maturity. For
example, a 91 day Treasury bill of Rs.100/- (face value) may be issued at say Rs. 98.20, that
is, at a discount of say, Rs.1.80 and would be redeemed at the face value of Rs.100/-.
EMI: You repay the loan in Equated Monthly Installments (EMIs) comprising both principal
and interest. Repayment by way of EMI starts from the month following the month in which
you take full disbursement
Micro enterprise is an enterprise where investment in plant and machinery does not
exceed Rs. 25 lakh.
Small enterprise is an enterprise where the investment in plant and machinery is more
than Rs. 25 lakh but does not exceed Rs. 5 crore
Medium enterprise is an enterprise where the investment in plant and machinery is
more than Rs.5 crore but does not exceed Rs.10 crore


Authorised capital
It is the maximum amount of capital the company is legally authorised to raise.
Micro Credit It is a term used to extend small loans to very poor people for self-
employment projects that generate income, allowing them to care for themselves and their
families.

Monetary policy is the process by which the government, central bank, of a country
controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of

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interest, in order to attain a set of objectives oriented towards the growth and stability of the
economy.
Active money is all the coins and paper currency in the hands of the public. The total value
of coins and paper currency in circulation amongst the public. The amount of active money
fluctuates seasonally, monthly, weekly and daily. In the United States, the Federal Reserve
Banks distribute new currency for the US Treasury Department. Banks lend money out to
customers which become classified as active money once it is actively circulated.

Estate duty is a tax on the total market value of a person's assets (cash and non-cash) at the
date of his or her death. It does not matter if the person has a Will or not, the assets are still
subject to estate duty. The deceased person's assets, as a whole, are called an estate.

Marginal Standing Facility Rate :Under this scheme, Banks will be able to borrow upto
1% of their respective Net Demand and Time Liabilities". The rate of interest on the amount
accessed from this facility will be 100 basis points (i.e. 1%) above the repo rate. This scheme
is likely to reduce volatility in the overnight rates and improve monetary transmission. In the
policy statement RBI has also declared "The stance of monetary policy is, among other
things, to manage liquidity to ensure that it remains broadly in balance, with neither a large
surplus diluting monetary transmission nor a large deficit choking off fund flows." RBI in its
Monetary Policy announced on 03rd May, 2011 that it will soon be introducing Marginal
Standing Facility (MSF). Later on RBI announced that MSF scheme has become effective
from 09th May, 2011.

Volatility Index is a measure of expected stock market volatility, over a specified time
period, conveyed by the prices of stock / index options. It depicts the collective sentiment of
the market on the implied future volatility.

Bond: A negotiable certificate evidencing indebtedness. It is normally unsecured. A debt
security is generally issued by a company, municipality or government agency. A bond
investor lends money to the issuer and in exchange, the issuer promises to repay the loan
amount on a specified maturity date. The issuer usually pays the bond holder periodic
interest payments over the life of the loan.

RMB is abbreviation for Ren Min Bi, when loosely translated into English means People's
Money / notes. Which is the official currency of China: RMB is the official currency in China.
What is the base unit for RMB: Yuan is the base unit for RMB - just as Dollar in USD. This is
the currency system in China

Dear money which has to be borrowed at a high interest rate, and so restricts expenditure
by companies A situation in which money or loans are very difficult to obtain in a given
country. If you do have the opportunity to secure a loan, then interest rates are usually
extremely high. Also known as "tight money". This situation can be a result of a restricted
money supply, causing interest rates to be pushed up due to the forces of supply and
demand. Businesses may have a tough time raising capital during a period of dear money.
Letter of credit (L/C): A written commitment to pay, by a buyer's or importer's bank
(called the issuing bank) to the seller's or exporter's bank (called the accepting bank,
negotiating bank, or paying bank).
letter of hypothecation: Written agreement, which authorizes a bank or lender to
repossess and sell the pledged item in case of a default. In international trade, a letter of
hypothecation enables an accepting bank to sell the shipment in case of the non-acceptance
or non-payment of the associated bill of exchange by the buyer.


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Letter of indemnity: A written undertaking by a third party (such as a bank or insurance
company), on behalf of one of the parties (the first party) to a transaction or contract, to
cover the other party (the second party) against specific loss or damage arising out the action
(or a failure to act) of the first party. Also called indemnity bond, bond of indemnity.
Capital account: An account that tracks the movement of funds for investments and loans
into and out of a country. The capital account makes up part of the balance of payments. An
account in which a firm records expenditure on capital items.

LAF(liquidity adjustment facility) is a facility extended by the Reserve Bank of India to the
scheduled commercial banks (excluding RRBs) and primary dealers to avail of liquidity in
case of requirement or park excess funds with the RBI in case of excess liquidity on an
overnight basis against the collateral of Government securities including State Government
securities. Basically LAF enables liquidity management on a day to day basis. The operations
of LAF are conducted by way of repurchase agreements (repos and reverse repos) with RBI
being the counter-party to all the transactions. The interest rate in LAF is fixed by the RBI
from time to time

Non-performing assets A loan or lease that is not meeting its stated principal and
interest payments. Banks usually classify as nonperforming assets any commercial loans
which are more than 90 days overdue and any consumer loans which are more than 180 days
overdue. More generally, an asset which is not producing income.

Usance
The length of time allowed for the payment of a bill of exchange.

Nifty is an indicator of all the major companies of the NSE. The Nifty represents the top
stocks of the NSE. NSE is the National Stock Exchange. The NSE is situated at Delhi.

Zero coupon bond A bond issued at a discount (i.e. below par value), earning no interest
but redeemable at its par value, thus providing a guaranteed capital gain.

Net worth: For a company, total assets minus total liabilities. Net worth is an important
determinant of the value of a company, considering it is composed primarily of all the money
that has been invested since its inception, as well as the retained earnings for the duration of
its operation. Net worth can be used to determine creditworthiness because it gives a
snapshot of the company's investment history also called owner's equity, shareholders'
equity, or net assets. For an individual, the value of a person's assets, including cash, minus
all liabilities. The amount by which the individual's assets exceed their liabilities is
considered the net worth of that person.
Merchant bank This is a specialist bank which advises large companies on mergers,
takeovers, raising capital and so on.

Bancassurance Reserve Bank of India (RBI) has recognized "Bancassurance" wherein
banks are allowed to provide physical infrastructure within their selected branch premises to
insurance companies for selling their insurance products to the banks customers with
adequate disclosure and transparency, and in turn earn referral fees on the basis of premium
collected. This would utilize the resources in the banking sector in a more profitable manner.

Mutual fund An investment product in which money of many investors are pooled &
professional manager(s) uses the pooled money to buy a portfolio of investments or
securities, and monitors each of the investments on an ongoing basis. There are many
varieties of mutual funds, each with specific objectives. By investing in a mutual fund, you
purchase units of that fund. The value of your units can go up or down depending on the type
and performance of the mutual fund.

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A central bank, reserve bank, or monetary authority is a public institution that
usually issues the currency, regulates the money supply, and controls the interest rates in a
country. Central banks often also oversee the commercial banking system of their respective
countries. In contrast to a commercial bank, a central bank possesses a monopoly on
printing the national currency, which usually serves as the nation's legal tender. Examples
include the European Central Bank (ECB), the Federal Reserve of the United States, and the
People's Bank of China.

The LIBOR (London interbank offered rate)
is the world's most widely used benchmark for short-term interest rates. It's important
because it is the rate at which the world's most preferred borrowers are able to borrow
money. It is also the rate upon which rates for less preferred borrowers are based. For
example, a multinational corporation with a very good credit rating may be able to borrow
money for one year at LIBOR plus four or five points. Countries that rely on the LIBOR for a
reference rate include the United States, Canada, Switzerland and the U.K. An interest rate at
which banks can borrow funds, in marketable size, from other banks in the London
interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association.
The LIBOR is derived from a filtered average of the world's most creditworthy banks'
interbank deposit rates for larger loans with maturities between overnight and one full year.
CURRENT DEPOSITS /ACCOUNTS: These accounts are used mainly by businessmen
and are not generally used for the purpose of investment. These deposits are the most liquid
deposits and there are no limits for number of transactions or the amount of transactions in
a day. Most of the current account are firm / company accounts. Cheque book facility is
provided and the account holder can deposit all types of the cheques and drafts in their name
or endorsed in their favour by third parties. No interest is paid by banks on these accounts.
On the other hand, banks charge service charges, on such accounts.
SAVING DEPOSITS / ACCOUNTS: These deposits / accounts are one of the most
popular deposits for individual accounts. These accounts not only provide cheque facility but
also have lot of flexibility for deposits and withdrawal of funds from the account. Most of the
banks have rules for the maximum number of withdrawals in a period and the maximum
amount of withdrawal, but hardly any bank enforces these. However, banks have every right
to enforce such restrictions if it is felt that the account is being misused as a current account.
The interest on these accounts at present is regulated by Reserve Bank of India. Banks in
India at present offer 4.00% p.a. interest rate on such deposits on daily balance basis. Under
directions of RBI, now banks are also forced to open no frill accounts which do not have any
minimum balance requirements.
RECURRING DEPOSITS / ACCOUNTS: These kinds of deposits are most suitable for
people who do not have lump sum amount of savings, but are ready to save a small amount
every month. Normally, such deposits earn interest on the amount already deposited
(through monthly instalments) at the same rates as are applicable for Fixed Deposits / Term
Deposits. These are best if you wish to create a fund for your child's education or marriage of
your daughter or buy a car without loans. Under these type of deposits, the person has to
usually deposit a fixed amount of money every month (usually a minimum of Rs,100/- p.m.).
Any default in payment within the month attracts a small penalty. However, some Banks
besides offering a fixed installment RD, have also introduced a flexible / variable RD. Under
these flexible RDs the person is allowed to deposit even higher amount of installments, with
an upper limit fixed for the same e.g. 10 times of the minimum amount agreed upon. Such
accounts are normally allowed for maturities ranging from 6 months to 120 months. A Pass
book is usually issued wherein the person can get the entries for all the deposits made by him
/ her and the interest earned. Premature withdrawal of accumulated amount permitted is

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usually allowed (however, penalty may be imposed for early withdrawals). These accounts
can be opened in single or joint names. Nomination facility is also available.
FIXED DEPOSIT ACCOUNTS / TERM DEPOSITS All Banks offer fixed deposits
schemes with a wide range of tenures for periods from 7 days to 10 years. The term "fixed" in
Fixed Deposits (FD) denotes the period of maturity or tenor. Therefore, the depositors are
supposed to continue such Fixed Deposits for the length of time for which the depositor
decides to keep the money with the bank. However, in case of need, the depositor can ask for
closing (or breaking) the fixed deposit prematurely by paying paying a penalty (usually of 1%,
but some banks either charge less or no penalty). (Some banks introduced variable interest
fixed deposits. The rate of interest on such deposits keeps on varying with the prevalent
market rates i.e. it will go up if market interest rates goes and it will come down if the market
rates fall. However, such type of fixed deposits have not been popular till date). The rate of
interest for Fixed Deposits differs from bank to bank (unlike previously when the same were
regulated by RBI and all banks used to have the same interest rate structure. The present
trends indicate that private sector and foreign banks offer higher rate of interest. The rate of
interest for Fixed Deposits differs from bank to bank (unlike previously when the same were
regulated by RBI and all banks used to have the same interest rate structure. The earlier
trend that private sector and foreign banks offer higher rate of interest is no more valid these
days. However, small banks are forced to offer higher rate of interest to attract more
deposits. Usually a bank FD is paid in lump sum on the date of maturity. However, some
banks have facility to pay interest at the end of every quarter. If one desires to get interest
paid every month, then the interest paid will be at a marginal discounted rate. In the
changed computerized environment, now the Interest payable on Fixed Deposit can also be
easily transferred on due dates to Savings Bank or Current Account of the customer

Appreciation (the opposite of depreciation) is the measure of a continued rise in the worth
of an asset. In other words how an asset (whether that be a house, a product or a market) has
gone from its initial value to a higher value. For example you may have bought your house in
the 1980s and it has appreciated in value ever since. Of course in some economies it may
have lost its value. In the property market causes of appreciation usually occur because of
inflation.
Bank accounts represent financial accounts in banks in which financial institutions hold
money for account holders, resulting in a debt balance or positive balance. Alternatively,
banks loan money to customers and this leads to a credit or negative balance. Bank accounts
are used to deposit savings, unlike brokerage accounts which are used to sell and buy
securities. Savings and checking accounts are two main types of bank accounts.
An automated teller machine or ATM is a computerized device which serves bank
clients by providing access to financial transactions (e.g. money withdrawals). This is done
without a bank teller, clerk, or cashier. With ATMs, clients access their bank accounts and
can check their account balance, make cash advance or cash withdrawal, or buy prepaid
phone credit. An additional benefit is that you can withdraw money in another currency,
which is converted at the daily exchange rate. In fact, automated teller machines offer the
best possible rate in many cases.
A bank account balance stands for the net of credits and debits of an account as of the
end of every reporting period. This is applicable to all account types. The amount your bank
owes you is shown in the bank account balance while what you owe to your credit card issuer
is shown in the credit card balance. In simple words, an account balance is the money you
presently have in your bank account. In banking, account balances give important
information. They determine if account holders have enough money to cover living expenses,

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outstanding debts, or emergency expenses. Account balances are also important in margin
accounts as they determine whether account holders can carry out margin transactions.
Banks are financial institutions that play the role of financial intermediaries, channeling
funds between deficit and surplus sources. An example of an intermediary is a banking
institution which turns deposits into loans. Financial intermediation is a function of banks
through which certain liabilities and assets are transformed into different kinds of liabilities
and assets. In this way, banking institutions channel funding from savers, who have
deposited extra money, to borrowers who need additional financing for certain objectives
and planned activities.
Offshore banking is a type of banking conducted at an offshore bank, which is a bank
located outside the depositors own country, usually in an area where the taxes are low, and
there are other financial and legal benefits. These benefits include, but are not limited to
greater privacy due to bank secrecy, easy access to deposits and protection against local
economic, financial, or political risks. The term offshore banking is quite fitting because
most offshore banks are located in islands, as was the very first one, from where the term
originated. However, the term today has come to include banks in Switzerland, Luxembourg,
and other landlocked countries in Europe and other places around the world.
Repo rate Whenever the banks have any shortage of funds they can borrow it from RBI.
Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo
rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing
from RBI becomes more expensive
CRR Rate in India Cash reserve Ratio (CRR) is the amount of funds that the banks have to
keep with RBI. If RBI decides to increase the percent of this, the available amount with the
banks comes down. RBI is using this method (increase of CRR rate), to drain out the
excessive money from the banks.
Inflation is defined as an increase in the price of bunch of Goods and services that projects
the Indian economy. An increase in inflation figures occurs when there is an increase in the
average level of prices in Goods and services. Inflation happens when there are fewer Goods
and more buyers; this will result in increase in the price of Goods, since there is more
demand and less supply of the goods.
Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from
banks. Banks are always happy to lend money to RBI since their money are in safe hands
with a good interest. An increase in Reverse repo rate can cause the banks to transfer more
funds to RBI due to this attractive interest rates. It can cause the money to be drawn out of
the banking system.
Deflation is the continuous decrease in prices of goods and services. Deflation occurs when
the inflation rate becomes negative (below zero) and stays there for a longer period...What
are the effects of Deflation?
During deflation the price of goods and services is falling and consumers will tend to delay
their purchases until prices fall further. This will cause for a lower production, lower wages
and demand which will lead to further decrease in prices. This is known as deflationary
spiral.

SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the
form of cash, or gold or govt. approved securities (Bonds) before providing credit to its
customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in
order to control the expansion of bank credit.

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SLR is determined as the percentage of total demand and percentage of time liabilities. Time
Liabilities are the liabilities a commercial bank liable to pay to the customers on their
anytime demand. With the SLR (Statutory Liquidity Ratio), the RBI can ensure the solvency
a commercial bank. It is also helpful to control the expansion of Bank Credits. By changing
the SLR rates, RBI can increase or decrease bank credit expansion. Also through SLR, RBI
compels the commercial banks to invest in government securities like government bonds.

"Derivative" indicates that it has no independent value, i.e. its value is entirely "derived"
from the value of the underlying asset. The underlying asset can be securities, commodities,
bullion, currency, live stock or anything else. In other words, Derivative means a forward,
future, option or any other hybrid contract of pre determined fixed duration, linked for the
purpose of contract fulfilment to the value of a specified real or financial asset or to an index
of securities.

Futures Contract means a legally binding agreement to buy or sell the underlying security
on a future date. Future contracts are the organized/standardized contracts in terms of
quantity, quality (in case of commodities), delivery time and place for settlement on any date
in future. The contract expires on a pre-specified date which is called the expiry date of the
contract. On expiry, futures can be settled by delivery of the underlying asset or cash. Cash
settlement enables the settlement of obligations arising out of the future/option contract in
cash.



Options Contract is a type of Derivatives Contract which gives the buyer/holder of the
contract the right (but not the obligation) to buy/sell the underlying asset at a predetermined
price within or at end of a specified period. The buyer / holder of the option purchase the
right from the seller/writer for a consideration which is called the premium. The
seller/writer of an option is obligated to settle the option as per the terms of the contract
when the buyer/holder exercises his right. The underlying asset could include securities, an
index of prices of securities etc.

Bond index is used to measure the performance of bond markets. The index is used as a
benchmark against which investment managers measure their performance. It is also used as
a measure to compare the performance of different asset classes. The government bond
market is the most liquid segment of the bond market.

Interest Rate Futures means a standardised interest rate derivative contract traded on a
recognized stock exchange to buy and sell a notional security or any other interest bearing
instrument or an index of such instruments or interest rates at a specified future date, at a
price determined at the time of the contract.

Acquirer means any person who, whether by himself, or through, or with persons acting in
concert with him, directly or indirectly, acquires or agrees to acquire shares or voting rights
in, or control over a target company. An acquirer can be a natural person, a corporate entity
or any other legal entity.

SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most
traded stocks of BSE. The base was 1979 and taken as 100. The 30 scrips of 1986 and no
more the same - some have been removed while some have been added. At irregular
intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition
to make sure it reflects current market conditions. SENSEX is the short term for the words
"Sensitive Index" and is associated with the Bombay (Mumbai) Stock Exchange (BSE).



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Currency futures are contracts to buy or sell a specific underlying currency at a specific
time in the future, for a specific price. Currency futures are exchange-trade contracts and
they are standardized in terms of delivery date, amount and contract terms. Currency future
contracts allow investors to hedge against foreign exchange risk. Since these contracts are
marked-to-market daily, investors can--by closing out their position--exit from their
obligation to buy or sell the currency prior to the contract's delivery date


Retail banking is a type of banking with which financial transactions are executed with
clients instead of other banks and corporations. Products and services provided include
credit and debit cards, transactional and savings accounts, personal loans, mortgages, and
many others. Retail banking is designed as a one-stop location for a number of financial
products and services. Some retail banks even offer various investment services, including
brokerage accounts, wealth management, retirement planning, and more. Some banks also
have commercial and merchant branches that cater to businesses.
Withdrawal
the act of withdrawing
the act of taking out money or other capital
CHIP and PIN
A Chip is a small electronic insert placed into a cheque or credit card. The PIN is a four digit
personal identification number which is used with the card by the card-holderAbsolute
Advantage:
Country A has an absolute advantage over country B if the output per unit of input of A is
higher than that of B.
Accelerator PrincipleAccelerator Principle of a company is the growth in ouput of the
company that would induce a continuation in net investment.
Ad Valorem Tax:
It is a tax based on the value of the property.
Aggregate Demand:
It is the total of all the demand in a country. It can also be expressed as
Total Exports of a country Total imports of the country.
Aggregate Supply:
Total value of goods and services produced in an economy + {Imports-Exports}
Asset:
Any item of monetary value like bank accounts, real estate property, stocks,..etc
Barter System:
Trade which doesnt involve the exchange of money
Bretton-Woods:
It is a monetary system that existed from the year 1946-1973. In this monetary system the
value of dollar was calculated using gold reserves and every other country held its currency
at an exchange rate with US dollars.

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Budget Deficit:
Budget Deficit = Government Expenditure- Government Revenues.
Call Money Market:
It is the market in which the Dealers and brokers locate and borrow money to satisfy their
investment needs.
Capital Gains Tax: Tax paid for the profit made through the sale of an asset.
Centrally planned economy: An economic system where the production & pricing of
goods and services are determined by the government.
Classical Economics: The theory emphasizes the fact that free market can regulate
themselves. This theory was framed by Adam Smith, David Ricardo, Thomas Malthus and
John Stuart Mill
Closed economy: The economy is closed and doesnt have any contact with the rest of the
world.
Countervailing Duties: These are the duties that are imposed by a country on Foreign
producers in order to neutralize the negative effects of other duties.
Currency Appreciation: Increase in the value of a currency over the other. It takes place
when the market exchange rates change.
Current Account Deficit: Current account deficit= Export-Import
Current GDP: Current GDP is GDP expressed in the current prices of the period being
measured
Customs Duty: Duty levied on imports.
Direct Tax: These are the taxes that are levied on us directly. Taxes on Corporate Income,
Capital Gains tax, Personal Income tax and Fringe benefit tax fall under this category.
Dividends:
It is the portion of the profits made by a company that is paid to the share holders.
Exchange rate: Also called as Foreign Exchange Rates or FOREX of a country specifies
how much the countrys currency is worth in terms of the other currency.
Fiscal Deficit: Fiscal Deficit= Government Expenditure in the current fiscal year-
Goverment Revenues in the fiscal year.
Fiscal Policy: It is the use of government revenue to influence the countrys economic
situation.
Foreign Direct Investment: It is the investment made by a company in one country on
building a factory in another country.
Foreign Institutional Investor: Investor from a foreign country.

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Free Trade: In this type of trade there is no tariffs to the imported or exported goods
between two countries.
Fringe Benefit: These are the benefits that are offered to employees in addition to their
salaries like lunch coupons, cars, free petrol etc.
GATT:
The General Agreement on Tariffs and Trade{GATT} was created in 1947 as a replacement to
International Trade Organization (ITO). GATT was replaced by World Trade Organization in
the year 1995.
Skewflation
Skewflation refers to inflation in some commodities, deflation in others. Indias Economic
survey 2010-11 says: The year 2010-11 has been a year of more than one such skewflationary
episode. At the beginning of the calendar year 2010 and even in the first months of the fiscal
year 2010-11 inflation was high for food grains, sugar, and pulses. During the course of the
year, inflation in these commodities stabilized, but by November there was another spike in
prices of another set of commodities, led by onions, cabbage, milk, and a couple of other
products.

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