What is Open Market operations(OMO)?
The buying and selling
of government securities in the open market in order to expand or
contract the amount of money in the banking system by RBI. Open market
operations are the principal tools of monetary policy.
· What is 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.
· What is Liquidity Adjustment Facility(LAF)?
A tool used in monetary policy that allows banks to borrow money
through repurchase agreements. This arrangement allows banks to respond
to liquidity pressures and is used by governments to assure basic
stability in the financial markets.
· What is RTGS System?
The acronym 'RTGS' stands for Real Time Gross Settlement. RTGS system
is a funds transfer mechanism where transfer of money takes place from
one bank to another on a 'real time' and on 'gross' basis. This is the
fastest possible money transfer system through the banking channel.
Settlement in 'real time' means payment transaction is not subjected to
any waiting period. The transactions are settled as soon as they are
processed. 'Gross settlement' means the transaction is settled on one to
one basis without bunching with any other transaction.
· What is Bancassurance?
It is the term used to describe the partnership or relationship between
a bank and an insurance company whereby the insurance company uses the
bank sales channel in order to sell insurance products.
· What is Wholesale Price Index(WPI)?
The Wholesale Price Index (WPI) is the index used to measure the
changes in the average price level of goods traded in wholesale market. A
total of 435 commodity prices make up the index. It is available on a
weekly basis. It is generally taken as an indicator of the inflation
rate in the Indian economy. The Indian Wholesale Price Index (WPI) was
first published in 1902, and was used by policy makers until it was
replaced by the Producer Price Index (PPI) in 1978.
· What is Consumer price Index(CPI)?
It is a measure estimating the average price of consumer goods and services purchased by households.
· What is Venture Capital?
Venture capital is money provided by an outside investor to finance a
new, growing, or troubled business. The venture capitalist provides the
funding knowing that there’s a significant risk associated with the
company’s future profits and cash flow. Capital is invested in exchange
for an equity stake in the business rather than given as a loan, and the
investor hopes the investment will yield a better-than-average return.
· What is a Treasury Bills?
Treasury Bills (T-Bills) are short term, Rupee denominated obligations
issued by the Reserve Bank of India (RBI) on behalf of the Government of
India. They are thus useful in managing short-term liquidity. At
present, the Government of India issues three types of treasury bills
through auctions, namely, 91-day, 182-day and 364-day. There are no
treasury bills issued by State Governments.
· What is Banking Ombudsmen Scheme?
The 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 is a senior
official appointed by the Reserve Bank of India to redress customer
complaints against deficiency in certain banking services. The Banking
Ombudsman Scheme was first introduced in India in 1995, and was revised
in 2002. The current scheme became operative from the 1 January 2006,
and replaced and superseded the banking Ombudsman Scheme 2002.
· What is Subsidy?
A subsidy is a form of financial assistance paid to a business or
economic sector. Most subsidies are made by the government to producers
or distributors in an industry to prevent the decline of that industry
or an increase in the prices of its products or to encourage it to hire
more labor.
· What is a Debenture? How many types of debentures are there? What are they?
A debenture is basically an unsecured loan to a corporation. A type of
debt instrument that is not secured by physical asset. Debentures are
backed only by the general creditworthiness and reputation of the
issuer.
i)Convertible Debentures: Any type of debenture that can be
converted into some other security or it can be converted into stock..
ii)Non-Convertibility Debentures(NCB): Non Convertible Debentures are
those that cannot be converted into equity shares of the issuing
company, as opposed to Convertible debentures. Non-convertible
debentures normally earn a higher interest rate than convertible
debentures do.
· What is a hedge fund?
‘Hedge’ means to reduce financial risk.
A hedge fund is an investment fund open to a limited range of investors
and requires a very large initial minimum investment. It is important
to note that hedging is actually the practice of attempting to reduce
risk, but the goal of most hedge funds is to maximize return on
investment.
· What is FCCB?
A Foreign Currency
Convertible Bond (FCCB) is a type of convertible bond issued in a
currency different than the issuer’s domestic currency. In other words,
the money being raised by the issuing company is in the form of a
foreign currency. A company may issue an FCCB if it intends to make a
large investment in a country using that foreign currency.
· What is Capital Account Convertibility(CAC)?
It is the freedom to convert local financial assets into foreign
financial assets and vice versa at market determined rates of exchange.
This means that capital account convertibility allows anyone to freely
move from local currency into foreign currency and back.
The Reserve Bank of India has appointed a committee to set out the framework for fuller Capital Account Convertibility.
Capital account convertibility is considered to be one of the major
features of a developed economy. It helps attract foreign investment.
capital account convertibility makes it easier for domestic companies to
tap foreign markets.
· What is Current Account Convertibility?
It defines at one can import and export goods or receive or make
payments for services rendered. However, investments and borrowings are
restricted.
· What is Arbitrage?
The opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.
· What is Capitalism?
Capitalism as an economy is based on a democratic political ideology
and produces a free market economy, where businesses are privately owned
and operated for profit; in capitalism, all of the capital investments
and decisions about production, distribution, and the prices of goods,
services, and labor, are determined in the free market and affected by
the forces of supply and demand.
· What is Socialism?
Socialism as an economy is based on a collectivist type of political
ideology and involves the running of businesses to benefit the common
good of a vast majority of people rather than of a small upper class
segment of society.
· What is corporate governance?
The way in which a company is governed and how it deals with the
various interests of its customers, shareholders, employees and society
at large. Corporate governance is the set of processes, customs,
policies, laws, and institutions affecting the way a corporation (or
company) is directed, administered or controlled.Is defined as the
general set of customs, regulations, habits, and laws that determine to
what end a firm should be run.
· Functions of RBI?
The
Reserve Bank of India is the central bank of India, was established on
April 1, 1935 in accordance with the provisions of the Reserve Bank of
India Act, 1934. The Reserve Bank of India was set up on the
recommendations of the Hilton Young Commission. The commission submitted
its report in the year 1926, though the bank was not set up for nine
years.To regulate the issue of Bank Notes and keeping of reserves with a
view to securing monetary stability in India and generally to operate
the currency and credit system of the country to its advantage." Banker
to the Government: performs merchant banking function for the central
and the state governments; also acts as their banker.Banker to banks:
maintains banking accounts of all scheduled banks.
· What is monetary policy?
A 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 interest, in order to attain a
set of objectives oriented towards the growth and stability of the
economy.
· What is Fiscal Policy?
Fiscal policy is the
use of government spending and revenue collection to influence the
economy. These policies affect tax rates, interest rates and government
spending, in an effort to control the economy. Fiscal policy is an
additional method to determine public revenue and public expenditure.
· What is Core Banking Solutions?
Core banking is a general term used to describe the services provided
by a group of networked bank branches. Bank customers may access their
funds and other simple transactions from any of the member branch
offices. It will cut down time, working simultaneously on different
issues and increasing efficiency. The platform where communication
technology and information technology are merged to suit core needs of
banking is known as Core Banking Solutions.
· What is E-Governance?
E-Governance is the public sector’s use of information and
communication technologies with the aim of improving information and
service delivery, encouraging citizen participation in the
decision-making process and making government more
accountable,transparent and effective.
· What is Right to information Act?
The Right to Information act is a law enacted by the Parliament of
India giving citizens of India access to records of the Central
Government and State overnments.The Act applies to all States and Union
Territories of India, except the State of Jammu and Kashmir - which is
covered under a State-level law. This law was passed by Parliament on 15
June 2005 and came fully into force on 13 October 2005.
· Credit Rating Agencies in India?
The credit rating agencies in India mainly include ICRA and CRISIL.
ICRA wasformerly referred to the Investment Information and Credit
Rating Agency of India Limited. Their main function is to grade the
different sector and companies in terms of performance and offer
solutions for up gradation. The credit rating agencies in India mainly
include ICRA and CRISIL(Credit Rating Information Services of India
Limited)
· What is Cheque?
Cheque is a negotiable
instrument instructing a Bank to pay a specific amount from a specified
account held in the maker/depositor's name with that Bank.A bill of
exchange drawn on a specified banker and payable on demand.“Written
order directing a bank to pay money”.
· What is demand Draft?
A demand draft is an instrument used for effecting transfer of money.
It is a Negotiable Instrument. Cheque and Demand-Draft both are used for
Transfer of money. You can 100% trust a DD. It is a banker's check. A
check may be dishonored for lack of funds a DD can not. Cheque is
written by an individual and Demand draft is issued by a bank. People
believe banks more than individuals.
· What is a NBFC?
A non-banking financial company (NBFC) is a company registered under the
Companies Act, 1956 and is engaged in the business of loans and
advances, acquisition of shares/stock/bonds/debentures/securities issued
by government, but does not include any institution whose principal
business is that of agriculture activity, industrial activity,
sale/purchase/construction of immovable property.
NBFCs are doing functions akin to that of banks; however there are a few differences:
(i)A NBFC cannot accept demand deposits (demand deposits are funds
deposited at a depository institution that are payable on demand --
immediately or within a very short period -- like your current or
savings accounts.)
(ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and
(iii) Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.
· Diff between banking & Finance?
Finance is generally related to all types of financial, this could be
accounting, insurances and policies. Whereas banking is everything that
happens in a bank only.The term Banking and Finance are two very
different terms but are often associated together. These two terms are
often used to denote services that a bank and other financial
institutions provide to its customers.
· What is NASSCOM ?
The National Association of Software and Services Companies (NASSCOM),
the Indian chamber of commerce is a consortium that serves as an
interface to the Indian software industry and Indian BPO industry.
Maintaining close interaction with the Government of India in
formulating National IT policies with specific focus on IT software and
services maintaining a state of the art information database of IT
software and services related activities for use of both the software
developers as well as interested companies overseas.
· What is ASSOCHAM?
The Associated Chambers of Commerce and Industry of India (ASSOCHAM),
India's premier apex chamber covers a membership of over 2 lakh
companies and professionals across the country. It was established in
1920 by promoter chambers, representing all regions of India. As an apex
industry body, ASSOCHAM represents the interests of industry and trade,
interfaces with Government on policy issues and interacts with
counterpart international organizations to promote bilateral economic
issues.
· What is NABARD?
NABARD was established by
an act of Parliament on 12 July 1982 to implement the National Bank for
Agriculture and Rural Development Act 1981. It replaced the Agricultural
Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of
Reserve Bank of India, and Agricultural Refinance and Development
Corporation (ARDC). It is one of the premiere agency to provide credit
in rural areas. NABARD is set up as an apex Development Bank with a
mandate for facilitating credit flow for promotion and development of
agriculture, small-scale industries, cottage and village industries,
handicrafts and other rural crafts.
· What is SIDBI?
The Small Industries Development Bank of India is a state-run bank aimed
to aid the growth and development of micro, small and medium scale
industries in India. Set up in 1990 through an act of parliament, it was
incorporated initially as a wholly owned subsidiary of Industrial
Development Bank of India.
· What is SENSEX and NIFTY?
SENSEX is the short term for the words "Sensitive Index" and is
associated with the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was
first formed on 1-1-1986 and used the market capitalization of the 30
most traded stocks of BSE. Where as NSE has 50 most traded stocks of
NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL
SHOW DAILY TRADING MARKS. Sensex and Nifty both are an "index”. An index
is basically an indicator it indicates whether most of the stocks have
gone up or most of the stocks have gone down.
· What is SEBI?
SEBI is the regulator for the Securities Market in India. Originally
set up by the Government of India in 1988, it acquired statutory form in
1992 with SEBI Act 1992 being passed by the Indian Parliament.
· What is Mutual funds?
Mutual funds are investment companies that pool money from investors at
large and offer to sell and buy back its shares on a continuous basis
and use the capital thus raised to invest in securities of different
companies. The mutual fund will have a fund manager that trades the
pooled money on a regular basis. The net proceeds or losses are then
typically distributed to the investors annually.
· What is Asset Management Companies?
A company that invests its clients' pooled fund into securities that
match its declared financial objectives. Asset management companies
provide investors with more diversification and investing options than
they would have by themselves. Mutual funds, hedge funds and pension
plans are all run by asset management companies. These companies earn
income by charging service fees to their clients.
· What are non-perfoming assets?
Non-performing assets, also called non-performing loans, are loans,made
by a bank or finance company, on which repayments or interest payments
are not being made on time. A debt obligation where the borrower has not
paid any previously agreed upon interest and principal repayments to
the designated lender for an extended period of time. The nonperforming
asset is therefore not yielding any income to the lender in the form of
principal and interest payments.
· What is Recession?
A
true economic recession can only be confirmed if GDP (Gross Domestic
Product)growth is negative for a period of two or more consecutive
quarters.
· What is foreign exchange reservers?
Foreign exchange reserves (also called Forex reserves) in a strict sense
are only the foreign currency deposits and bonds held by central banks
and monetary authorities.However, the term in popular usage commonly
includes foreign exchange and gold,SDRs and IMF reserve positions.
