Banking Awarness For Ibps Po 2014

8/11/2019 Banking Awarness For Ibps Po 2014

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http://gkexamz.blogspot.in Prepared By Nil Faldu

ASBA: Application Supported by Blocked Amount - It is a process developed

by the SEBI for applying to IPO. In ASBA, an IPO applicants account doesnt get debited

until shares are allotted to him.

DEPB Scheme: Duty Entitlement Pass Book -It is a scheme which is offered by

the Indian government to encourage exports from the country. DEPB means Duty

Entitlement Pass Book to neutralise the incidence of basic and special customs duty on

import content of export product.

LLP: Limited Liability Partnership - is a partnership in which some or all partners

(depending on the jurisdiction) have limited liability.

Balance sheet - A financial statement that summarises a companys assets, liabilities

and shareholders equity at a specific point in time.

TAN: Tax Account Number- is a unique 10-digit alphanumeric code allotted by the

Income Tax Department to all those persons who are required to deduct tax at the

source of income.

PAN: Permanent Account Number-as per section 139A of the Act obtaining PAN

is a must for the following persons:-

Any person whose total income or the total income of any other person in respect

of which he is assessable under the Act exceeds the maximum amount which isnot chargeable to tax.

Any person who is carrying on any business or profession whose total sales,

turnover or gross receipts are or are likely to exceed Rs. 5 lakh in any previous year.

Any person who is required to furnish a return of income under section 139(4) of

the Act.

JLG: Joint Liability Group - when two or more persons are both responsible for adebt, claim or judgment.

IRR: Internal Rate of Return - is a rate of return used in capital budgeting to

measure and compare the profitability of investments.


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MICR: Magnetic Ink Character Recognition - A 9-digit code which actually shows

whether the cheque is real or fake.

UTR Number: Unique Transaction Referencenumber - A unique number which

is generated for every transaction in RTGS system. UTR is a 16-digit alphanumeric code.

The first 4 digits are a bank code in alphabets, the 5th one is the message code, the 6th

and 7th mention the year, the 8th to 10th mentions the date and the last 6 digits

mention the days serial number of the message.

RRBs: Regional Rural Banks -As its name signifies, RRBs are specially meant for

rural areas, capital share being 50% by the central government, 15% by the state

government and 35% by the scheduled bank.

MFI: Micro Finance Institutions - Micro Finance means providing credit/loan

(micro credit) to the weaker sections of the society. A microfinance institution (MFI) isan organisation that provides financial services to the poor.

PRIME LENDING RATE- PLR is the rate at which commercial banks give loans to its

prime customers (most creditworthy customers).

BASE RATE- A minimum rate that a bank is allowed to charge from the customer.

Base rate differs from bank to bank. It is actually a minimum rate below which the bank

cannot give loan to any customer. Earlier base rate was known as BPLR (Base Prime

Lending Rate).

EMI: Equated Monthly Installment -It is nothing but a repayment of the loan

taken. A loan could be a home loan, car loan or personal loan. The monthly payment is

in the form of post dated cheques drawn in favour of the lender. EMI is directly

proportional to the loan taken and inversely proportional to time period. That is, if the

loan amount increases the EMI amount also increases and if the time period increases

the EMI amount decreases.

Basis points (bps)- A basis point is a unit equal to 1/100th of a percentage point. i.e.

1 bps = 0.01%. Basis points are often used to measure changes in or differences

between yields on fixed income securities, since these often change by very small

amounts.

Liquidity- It refers to how quickly and cheaply an asset can be converted into cash.

Money (in the form of cash) is the most liquid asset.


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P-NOTES- P means participatory notes. These are the instruments issued by

registered foreign institutional investors (FII) to overseas investors, who wish to invest in

the Indian stock markets without registering themselves with the market regulator, the

Securities and Exchange Board of India - SEBI.

Certificate of Deposit (CD) - is a negotiable money market instrument and issued in

dematerialised form for funds deposited at a bank or other eligible financial institution

for a specified time period.

Commercial Paper (CP)- is an unsecured money market instrument issued in the

form of a promissory note. It was introduced in India in 1990. Corporates and the All-

India Financial Institutions are eligible to issue CP.

REER - Real Effective Exchange Rate.

NEER- Nominal Effective Exchange Rate.

LIBOR- London Inter Bank Offer Rate.

MIBOR- Mumbai Inter Bank Offer Rate.

EFTElectronic Fund Transfer

NEFT National Electronic Funds Transfer

RTGSReal Time Gross Settlement

ATMAutomated Teller Machine

CBSCore Banking Solution

COREin CBSstands for Centralized Online Real-time Exchange.

Banking Notes for RBI & SBI exams PartI

RBI - he Reserve Bank of India was established on April 1, 1935 in accordance with the

provisions of the RBI Act, 1934. RBI was nationalized in 1949 and it is fully owned by the

Government of India. RBI was established on the recommendation of the Hilton Young

Commission.


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RBIs FUNCTIONS:

Issue of currency notes

Controlling the monetary policy

Regulator and supervisor of the financial system

Banker to other banks

Banker to the government

Granting licenses to banks

Control over NBFIs (Non Banking Financial Institutions)

Manager of Foreign Exchange of India (also known as FOREX)

RBI And Monentry Policy - Monetary policy refers to the use of instruments under

the control of the central bank to regulate the availability, cost and use of money and

credit.

The main objectives of monetary policy in India are:

Maintaining price stability.

Ensuring adequate flow of credit to the productive sectors of the economy to

support economic growth

Financial stability.

There are several direct and indirect instruments that are used in the formulation and

implementation of monetary policy.

Direct Instruments :

Cash Reserve Ratio (CRR):The share of net demand and time liabilities that

banks must maintain as cash balance with the Reserve Bank.

Statutory Liquidity Ratio (SLR):The share of net demand and time liabilities that

banks must maintain in safe and liquid assets, such as government securities,

cash and gold.

Refinance facilities:Sector-specific refinance facilities (e.g., against lending to

export sector) provided to banks.

Indirect Instruments :


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Liquidity Adjustment Facility (LAF):Consists of daily infusion or absorption of

liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo

(liquidity absorption) auction operations, using government securities as

collateral.

Open Market Operations (OMO):Outright sales/purchases of government

securities, in addition to LAF, as a tool to determine the level of liquidity over the

medium term.

Market Stabilisation Scheme (MSS):This instrument for monetary management

was introduced in 2004. Liquidity of a more enduring nature arising from large

capital flows is absorbed through sale of short-dated government securities and

treasury bills. The mobilised cash is held in a separate government account with

the Reserve Bank.

Repo/reverse repo rate:These rates under the Liquidity Adjustment Facility (LAF)

determine the corridor for short-term money market interest rates. In turn, this

is expected to trigger movement in other segments of the financial market and

the real economy.

Bank rate:It is the rate at which the Reserve Bank is ready to buy or rediscount

bills of exchange or other commercial papers. It also signals the medium-term

stance of monetary policy.

Some Key Financial Terms :

APR -It stands for Annual Percentage Rate. APR is a percentage that is

calculated on the basis of the amount financed, the finance charges, and the

term of the loan.

ABS -Asset-Backed Securities. It means a type of security that is backed by a

pool of bank loans, leases, and other assets.

EPS -Earnings Per Share means the amount of annual earnings available to

common stockholders as stated on a per share basis.

CHAPS- Clearing House Automated Payment System. Its a type of electronic

bank-to-bank payment system that guarantees same-day payment.


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IPO -Initial Public Offerings is defined as the event where the company sells its

shares to the public for the first time. (or the first sale of stock by a private

company to the public.)

FPO -Follow on Public Offerings: An issuing of shares to investors by a public

company that is already listed on an exchange. An FPO is essentially a stock issue

of supplementary shares made by a company that is already publicly listed and

has gone through the IPO process.(Difference: IPO is for the companies which

have not been listed on an exchange and FPO is for the companies which have

already been listed on an exchange but want to raise funds by issuing some

more equity shares.)

RTGS -Real Time Gross Settlement systems is a funds transfer system where

transfer of money or securities takes place from one bank to another on a real

time. (Real time means within a fraction of seconds.) The minimum amount tobe transferred through RTGS is Rs 2 lakh. Processing charges/Service charges for

RTGS transactions vary from bank to bank.

NEFT -National Electronic Fund Transfer. This is a method used for transferring

funds across banks in a secure manner. It usually takes 1-2 working days for the

transfer to happen. NEFT is an electronic fund transfer system that operates on a

Deferred Net Settlement (DNS) basis which settles transactions in batches. (Note:

RTGS is much faster than NEFT.)

CAR - Capital Adequacy Ratio. Its a measure of a banks capital. Also knownas Capital to Risk Weighted Assets Ratio (CRAR) , this ratio is used to protect

depositors and promote the stability and efficiency of financial systems around

the world. It is decided by the RBI.

NPA - Non-Performing Asset. It means once the borrower has failed to make

interest or principal payments for 90 days, the loan is considered to be a non-

performing asset. Presently it is 2.39%.

IMPS - Immediate Payment Service. It is an instant interbank electronic fund

transfer service through mobile phones. Both the customers must have MMID

(Mobile Money Identifier Number). For this service, we dont need any GPS -

enabled cell phones.

BCBS -Basel Committee on Banking Supervision is an institution created by the

Central Bank governors of the Group of Ten nations.


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IFSC code - Indian Financial System Code. The code consists of 11 characters for

identifying the bank and branch where the account in actually held. The IFSC

code is used both by the RTGS and NEFT transfer systems.

MICR Code - Magnetic ink character recognition (MICR) is a character-

recognition technology used mainly by the banking industry to ease the

processing and clearance of cheques and other documents. It is at the bottom of

cheques and other vouchers and typically includes the document-type indicator,

bank code, bank account number, cheque number, cheque amount, and a control

indicator.

MSME and SME - Micro Small and Medium Enterprises (MSME), and SME stands

for Small and Medium Enterprises. This is an initiative of the government to drive

and encourage small manufacturers to enjoy facilities from banks at concessionalrates.

LIBOR - London InterBank Offered Rate. An interest rate at which banks can

borrow funds, in marketable size, from other banks in the London interbank

market.

LIBID - London Interbank Bid Rate. The average interest rate at which major

London banks borrow Eurocurrency deposits from other banks.

ECGC - Export Credit Guarantee Corporation of India. This organisation providesrisk as well as insurance cover to the Indian exporters.

SWIFT - Society for Worldwide Interbank Financial Telecommunication. It

operates a worldwide financial messaging network which exchanges messages

between banks and other financial institutions.

STRIPS - Separate Trading for Registered Interest & Principal Securities.

CRISIL - Credit Rating Information Services of India Limited. Crisil is a global

analytical company providing ratings, research, and risk and policy advisory

services.

CIBIL - Credit Information Bureau of India Limited. CIBIL is Indias first credit

information bureau. Whenever a person applies for new loans or credit card(s) to

a financial institution, they generate the CIBIL report of the said person or


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Expenditure of Rs 1407 per person per month(Rs 46.9 per person per month)in

urban areas.

Total number of poor will rise to 363 million (29.6% of total

population)according to C. Rangarajan panel recommendations

What will be the effects of the Rangarajan committee proposals on theeconomy?

More people will come under the ambit of below poverty line standards.

This will increase the number of beneficiaries who can claim the benefits given to

the BPL families.

The step will create more burden on their fiscal budget to help BPL families under

the different PDS (public distribution schemes), Rashtriya Swastha Bima Yojana,

Swarnajayanti Gram Swarojgar Yojna etc.

More deserving people who were out of the reckoning due to previousbenchmarks would come under the benefits

What are NPAs(Non Performing Assets)

A mortgage in default would be considered non-performing, after a prolonged period of

non-payment(90 days).

The lender will force the borrower to liquidate any assets that were pledged as part of

the debt agreement. If no assets were

pledged, the lenders might write-off the asset as a bad debt and then sell it at a discount

to a collections agency.

Here is an example to help you understand what NPAs are and howBanks counter it-

Mr. X decided to start a business for that he needed money (the fuel) , X had 25% of the

money in his pocket, he decided to go through the route of Initial Public Offering(IPO)

to generate 25% more by offering his company shares to public , the remaining 50% he

borrowed from Lena bank by mortgaginghis papas land.

Days passed and the company started to do badly then to worse and the loan

installments lapsed month on month, Lena bank issued warning but X continued the bad

practice for more than 90 days(condition for NPA) and the bank labeled X as defaulter

and the loan as a Non Performing Asset.


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Now what X will do?

He could take his case against the bank to Debt recovery tribunal(DRT- A court for

such cases).

What are Lena banks options?- In 2002, Govt. gave banks a lifeline calledas SARFAESI Act(Securitization and Reconstruction of Financial Assets and

Enforcement of security interest Act)\

With this Act Lena bank has the power to take possession of Mr.Xs property or

can transfer this to some other ownership

What bank will do with the acquired property?

Bank can use this for their own purpose like , opening a new branch on it,

installing of ATMs etc.

Bank can advertise in newspapers for the auction of the property acquired and

could auction them on any pre decided day.

Bank can sell the property to ARC(Asset Reconstruction Company), these are

registered companies under RBI, they buy such assets from banks and sell them

at higher prices to gain profits.

NOTE- Total amount of NPAs are around 4.4% of the total assets of banks in India andexpected to increase to 4.7% till the end of FY15

Inflation and RBIPART-I

To understand RBI monetary policy we have to understand why RBI has to do all this

mehnat, RBI has a biggest villain standing against him called as INFLATION.

Inflation

Inflation is the biggest parasite in the Indian economy. In the condition of inflation there

is flow of extra money in the economy creating excess of demand in the market for theproducts as compared to supply in midst of all this maara maari the producers grab this

opportunity with both arms and if possible with legs too (too greedy these fellows), they

mark higher prices for the goods that are excess in demand and this creates a rise in

price of the products resulting in inflation.

Inflation has the following adverse effects on the economy:


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Here is story of Mr. Bechara(common man)

Inflation and Purchasing Products-

Purchasing Power-The value of a currency expressed in terms of the amount

of goods or services that one unit of money can buy. Purchasing power isimportant because, all else being equal, inflation decreases the amount of goods

or services you'd be able to purchase. Mr.Bechara is fetching a salary of Rs.20K

monthly, he was doing his best to keep up to the expectations his over sized wife

and extra demanding kids, Now in inflation his salary is the same but his 20K will

now cannot complete the demands of his family, because that 20K has become

equivalent to say, 18K and now they can have less resources in the same prices,

This will result in the debt conditions , lesser purchase of goods and services(due

to higher prices) and will directly hurt the economy.

Inflation and Debt-

Price inflation is adebtor's best friend and a creditor's worst enemy. Lets see how, our

Mr. Bechara gave Rs. 10K to a debtor in 2006 for a period of three years, after two years

inflation occurred, now the value of that 10k becomes equivalent to 8k (loss in the value

of Rs), The effect of inflation on debtors is positive because debtors can pay their debts

with money that is less valuable.

Other negative impacts

Black-marketing-Expecting inflation many mafias start to collect the onions

and kerosene in their backyards for releasing these when the inflation strikes,

hence they will make big bucks in no time and our Mr. Bechara has to pay more

than hefty amount for the daily ka aaloo ,pyazz..

Unemployment - Inflation comes along with a gift package of unemployment,

companies with limited resources will start to fire people on the name of cost

cutting and also the new recruitments will not happen resulting in not so aache

din for aspirants.

Different stages of Inflation-

Creeping Inflation- Creeping or mild inflation is when prices rise 3% a year or

less.


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Walking Inflation- This type of strong, or pernicious, inflation is between 3-

10% a year. It is harmful to the economy because it heats up economic growth

too fast.

Galloping Inflation - When inflation rises to ten percent or greater, it wreaks

absolute havoc on the economy. Money loses value so fast that business and

employee income can't keep up with costs and prices. Foreign investors avoid the

country.

Hyperinflation - Hyperinflation is when the prices skyrocket, the currency

becomes a piece of trash, Zimbabwe experienced a similar conditions in previous

years.

Calculation of Inflation- In India inflation is calculated by the help ofCPI(Consumer Price Index),previously it was calculated by WPI(Wholesale Price

Index), CPI as a scale was adopted by RBI ,due the recommendations of Urijit

Patel committee.

RBI and Inflation:Part II

Now we have a brief knowledge about Inflation and its effect on the economy, So as

customary there will always be a hero against a villain ,fighting for supremacy andsabotaging it to ashes.For the purpose we have our own homegrown Mr.007 and the

name is Rajan Raghuram Rajan, RBI with the help of its periodically revised monetary

policy try to fight against inflation.

MONETARY POLICY

Monetary policy consists of two tools-

A) DIRECT TOOLS

B) INDIRECT TOOLS

A) DIRECT TOOLS -these tools are the special powers of RBI through which it can

direct and control the amount of flow of money in the market, these consists of SLR

(statutory liquidity ratio)and CRR (Cash reserve ratio), lets understand them

individually.


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CRR- CRR is 4% of NDTL(Net Demand and Time Liability), this the amount of

money banks park with RBI in the form of cash.(must for banks)

SLR- SLR is 22.5% of NDTL, this the amount that the banks has to maintain in the

form of gold or govt. securities before lending to the public.(must for banks).

NOTE:NDTLis the sum of all the demand (current account and savings account sum in

bank ) and time (fixed deposits or recurring deposits etc. which are to be paid on

maturation), these are assets for us but a liability(debt) for the banks.

Here is an example to show the effect of CRR and SLR.

Let say our Lena Bank had 100 Rs as NDTL they can give this much amount of loan to the

needy hence 100Rs will flow in the market(can cause inflation), so Rajan(RBI) said keep

4% with us and 22.5% as SLR in the form of govt securities and gold(which cant be given

as loans) so theLena bank is left with only 73.5%(100-22.5-4) of the NDTL resulting inless money to be given as loans and then in market resulting in check on inflation.

B) INDIRECT TOOLS/OMO (Open Market Operations) -An open market

operation (also known as OMO) is an activity by a central bank to buy or sell

government bonds on the open market. these tools indirectly help in controlling

inflation. Different methods in OMOs are-

LAF (Liquidity Adjustment Facility) -These contains Repo rate and Reverse Repo

rate

REPO RATE (Repurchase Agreements)- this is the rate at which the banks

borrow the money from RBI to meet their sudden demands, these are done with

the help of repurchase agreements (these are govt securities which has a date

on it claiming to be re bought at some certain date).

How RBI controls inflation with this-RBI increase the Repo rate in the conditions ofhigh inflations so that banks are not encouraged to borrow money from RBI and release

them in to the market resulting in lesser flow of money and hence inflations decreases.

RBI decreases the REPO rate when the inflation is under control .

Current REPO rate stands at 8% of NDTL.

Reverse RepoThis is the opposite of the repo rate and is the rate at which banks

park their excess money with RBI which in turn gives the govt. securities under

repurchase agreement . Banks do this because their money is in safe hands and they

get a healthy rate of interest against the park amount.


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Current Reverse Repo rate is at 7% of NDTL(-1% of REPO rate)

Bank Rate-When banks borrow long term funds from RBI. Theyve to pay this much

interest rate to RBI.

Current Bank Rate is at 9% of NDTL(+1% of Repo rate)

MSF(Marginal Standing Facility)-the difference between Repo and MSF is that there is a

minimum amount of Rs 1 cr to be borrowed by banks. And this facility is only for

Scheduled Commercial Banks (SCBs).this is done to balance the daily mismatches of

banks.

Current MSF is at 9 % of NDTL(+1 % of Repo rate) .With the help of these, our 007(RBI) try to control inflation.

Computer Quick Notes For SBI Clerk Exam

A collection of 8 bits is called Byte. Abit is the smallest unit of storage.

The first computer architecture was introduced by John Von Neumann.

A website containing periodic posts is called Blog.

Starting up on operating system is called Booting.

Restarting a computer that is already on, is referred to as Warm Booting.A program used to browse the web is called Browser.

The code for a Web page is written using Hypertext Markup language (HTML).

A series of instructions that tells a computer what to do and how to do it is called

a Program.

The device which is used with a computer to display or store data is

called Peripherals.

The mechanical, magnetic, electronic and electrical components that comprises a

computer system such as the Central Processing Unit (CPU), monitor, keyboard,

etc. is known as Hardware.

A set of instructions that tells the computer about the tasks to be performed and

how these tasks are to performed, is known as Software.

Executingis the process of carrying out commands.

The rectangular area of the screen that displays a program, data, and or

information is a Window.


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Downloadingmeans to receive data to a local system from a remote system, or

to initiate such a data transfer.

Uploadingrefers to the sending of data from a local system to a remote system

such as a server or another client with the intent that the remote system should

store a copy of the data being transferred.An email attachmentis a computer file sent along with an email message. One or

more files can be attached to any email message, and be sent along with it to the

recipient.

CC (Carbon Copy)in email indicates those who are to receive a copy of a

message addressed primarily to another. The list of CCed recipients is visible to

all other recipients of the message.

An additional BCC (Blind Carbon Copy)field is available for hidden notification;

recipients listed in the BCC field receive a copy of the message, but are not shown

on any other recipient's copy (including other BCC recipients).

Disk driveis the part of the computer helps to store information.

Arithmetic operationsinclude addition, subtraction, multiplication, and division.

The most important or powerful computer in a typical network isNetwork

Server.

The primary purpose of softwareis to turn data into information.

A collection of related files is called Record.

Storage that retains its data after the power is turned off is referred to as Non-

Volatile Storage. ROM is an example of this type of storage.

Virtual memoryis memory on the hard disk that the CPU uses as an extended

RAM.

Computers use the Binary Number System to store data and perform

calculations.

When sending an e-mail, the Subject line describe the contents of the message.

The Operating Systemtells the computer how to use its components.

During the cutting and pasting of an item, the part which is cut, is temporarily

stored in Clipboard. The blinking symbol on the computer screen is called the Cursor.

Magnetic tapeis not practical for applications where data must be quickly

recalled because tape is a sequential access medium.

Information travels between components on the motherboard through Buses.


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A Website Addressis a unique name that identifies a specific web site on the

web.

Alt, Ctrl & Shift keys in a keyboard are known as: Modifier keys.

Caps lock, Num lock & Scroll lock in a keyboard are known as: Toggle keys.

F1 to F12 keys in a keyboard are known as: Function keys.A person who uses his or her expertise to gain access to other peoples

computers to get information illegally or do damage is a Hacker.

A Computer Virusis a malware program that, when executed, replicates by

inserting copies of itself (possibly modified) into other computer programs, data

files, or the boot sector of the hard drive; when this replication succeeds, the

affected areas are then said to be "infected".

Antivirus Softwareis used to scan the hard disk to remove the virus from them.

The assembly language program is translated into machine code by a separate

program known as an Assembler.

A Backup,or the process of backing up, refers to the copying and archiving of

computer data so it may be used to restore the original after a data loss event. It

contains a copy of every program data and system file on a computer.

Rail Budget Highlights 2014

The new government led by Prime Minister Narendra Modi presented its maiden budget

-- its first big policy statement on how it intends to overhaul an economy saddled with

slow growth and weak public finances.

Railway Minister Sadananda Gowda presented the Rail Budget in the Parliament today.

Here are some highlight

Indian railways to become the largest freight carrier in the world.

Social obligation of Railways in 2013-14 was Rs 20,000 crore.

Gross traffic receipts in 2013-14 was Rs 12,35,558 crore; operating ratio was 94 per

cent.

Focus in past has been on sanctioning projects rather than completing them, Railway

minister says.

Indian Railways spent Rs 41,000 crore on laying of 3,700 km of new lines in last 10

years.

Fare revision will bring in Rs.8,000 crore; need another Rs.9,000 crore for golden

quadrilateral project.


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Railways also proposes to set up Food Courts at major stations.

Need to explore alternative sources of resource mobilisation and not depend on fare

hike alone, Railway minister says.

Spend 94 paisa of every rupee earned, leaving a surplus of only 6 paisa.

With 12,500 trains, railways move 23 million passengers every day; equivalent to

moving Australia's population.

Separate housekeeping wing at 50 major stations.

CCTV to monitor cleanliness activities.

Mechanized laundry will be introduced.

Dedicated freight corridor on Eastern and Western corridors.

5400 unmanned level crossing removed.

Tourist trains to be introduced to link all major places of tourist interests across the

country.

4,000 women constables to be recruited to ensure safety of women. 17,000 RPF

constables to provide safety to passengers.Setting up of Railway University for technical and non-technical study.

Ultrasonic system to detect problem in track.

Proposal to start Bullet trains in MumbaiAhmedabad route. Speed of important

trains will be also raised.

Diamond Quadrilateral project of high speed trains to connect all major metros.

E-ticketing system to be improved. Future e-ticketing to support 7200 tickets per

minute & to allow 120,000 simultaneous users

Wifi in A1 and A category stations and in select trains. Internet-based platform and

unreserved tickets.

GIS mapping and digitization of Railway Land. Extension of logistics support tovarious e-Commerce Companies.

Bulk of future projects will be financed through PPP mode.

Facilitate transport of milk through rail. Special milk transportation trains in

association with Amul and National Dairy Association Board.

One ticket to reach from Delhi to Srinagar. Uddhampur to Banihal by bus and Banihal

to Srinagar by train.

Mumbai local to get 860 new, state-of-the art coaches. 64 new EMUs to be

introduced.

Train connectivity to Char Dham.

Paperless office of Indian railways in 5 years. Digital reservation charts at stations.

Ready-to-eat meals to be introduced in phased manners.

27 Express trains to be introduced.

5 Jansadharan , 5 Premium AC trains to be introduced.


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Banking Concepts - FDI in retail

So now when Carrefour ,the French retail giant is planning to exit all the retail

businesses in India and only Tesco(UK setup) is planning to invest in India the questionthat looms largely over India is, Is this the right strategy of Modi regime to discourage

FDI in retail ?

So here are the pro and cons of the introduction of FDI in retail-

Ill effects of FDI :

It will lead to closure of small scale shops across the country and endanger

livelihood of some million people.

It may bring down prices initially, but this will be a predatory pricing scheme bymultinational companies to get a stronghold in the retail market later they will

increase the prices once the competition dries up, hence Small and medium

enterprises will become victims of predatory pricing policies of multinational

retailers

Farmers may be given remunerative prices initially, but eventually they will be at

the mercy of big retailers

It will disintegrate established supply chains by encouraging monopolies of global

retailers

FDI as a boon to India:

It will cut intermediaries between farmers and the retailers, thereby helping

them get more money for their produce

It will help in bringing down prices at retail level and calm inflation

Big retail chains will invest in supply chains which will reduce wastage, estimated

at 40 percent in the case of fruits and vegetables

Small and medium enterprises will have a bigger market, along with better

technology and branding

It will bring much-needed foreign investment into the country, along withtechnology and global best-practices

It will actually create employment than displace people engaged in small stores

It will induce better competition in the market, thus benefiting both producers

and consumers.


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This is an open debate for one and all to discuss pro and cons of FDI according to you and till

what extent our govt. is by not being in favour of FDI in retail.

Indian economy to expand 5.4-5.9 per cent this fiscal:Economic Survey

The Economic Survey for 2013-14 tabled in Parliament by Finance Minister Arun Jaitley

on Wednesday - prepared by senior economic advisor Ila Patnaik - on the state of Asia's

third-largest economy a day before Modi's new government presents its first budget.

Following are key highlights of the report:

1. Growth: GDP growth seen at 5.4 - 5.9 percentin 2014/15

- Economic growth of 7-8 percentnot seen before 2016/17

2. Fiscal Health: Fiscal deficit for 2013-14 contained at 4.5% of the GDP

3. Inflation:

- Government needs to move towards low and stable inflation through fiscal

consolidation

- Wholesale Price Index (WPI) inflation expected to moderate by end-2014

- Consumer Price Index (CPI) inflation showing signs of moderation

4. Current Account Deficit: 2014/15 current account deficit may be contained to around

$45 billion or to 2.1 percent of GDP

5. Balance of Payments: Improvement in balance of payments position during late

2013-14 was swift thanks to import restrictions and economic slowdown

- Need to adjust to advanced economies' eventual exit from accommodative monetary

policy stance

6. Taxation: Government needs to move towards simple tax regime, fewer tax

exemptions and single rate of goods and services tax (GST)- GST to play vital role in indirect tax reform

- Direct Taxes Code (DTC) required to replace existing income tax laws; will reduce

compliance costs and boost tax collection

7. Agriculture:India ranks first in the world in productivity of grapes,banana, cassava,

peas, and papaya


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- Agriculture sector growth rate 4.7% inthe year 2013-14

- Agriculture exports grow by 5.1% in the year 2013-14

- Exports of marine products show a growth rate of 45% in the year 2013-14

8. Industrial Performance: Industry grew by just 1.0 percent in 2012-13 and slowed

further in 2013-14, posting a modest increase of 0.4 percent.- During 2013-14, FDI inflow (including equity inflows, reinvested earnings and other

capital) was USD 36.4 billion.

- Overall gross bank credit flow to industry has increased by 14.9 percent in 2013-14.

9. Services: India ranked 12th in terms of services GDP among the worlds top 15

countries

- India has the second fastest growing services sector with its CAGR at 9.0 percent, just

below China

- The growth rate of the combined category of trade, hotels, restaurants, transport,

storage, and communications decelerated to 3.0 percent- Financing, insurance, real estate, and business services grew robustly at 12.9 percent

- Services constitute a 57 percentshare in GDP at factor cost in 2013-14

TAXES

Taxes are the amount of money government impose on an individual or corporates

directory or indirectly so as to generate revenue or to keep in check any black money

activities in india

There Are Two Categories of Taxes in India, These Are :

1) Direct Taxes

2) Indirect Taxes

Direct Taxes :

Income Tax

CorporatationTax

Securities Transaction Tax

Wealth Tax

1) Direct Taxes :


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These taxes are levied directly on the presons.

These contributes major chunk of the total taxes collected in India.

Some of the direct taxes are-

Income Tax :This is a type of tax levied on the individuals whose income falls under the taxable

category (2.5 lakhs per annum). The Indian Income Tax Department is governed by CBDT

and is part of the Department of Revenue under the Ministry of Finance, Govt. of India.

Income tax is a key source of funds that the government uses to fund its activities and

serve the public.

Corporate Income Tax :

This is the tax levied on the profits a corporate house earned in a year. In India, the

Corporate Income tax rate is a tax collected from companies. Its amount is based on thenet income companies obtain while exercising their business activity, normally during

one business year.

Securities Transaction Tax :

Introduced in 2004, STT is levied on the sale and purchase of equities. more clearly, The

income a individual generate through the securities market be it through reseling of

shares or through debentures is taxed by the government of India and the same tax is

called as Securities Transaction Tax.

Banking Cash Transaction Tax:

A bank transaction tax is a tax levied on debit (and/or credit) entries on bank accounts.

It can be automatically collected by a central counterparty in the clearing or settlement

process.

2) Indirect Taxes :

You go to a super market to buy goods or to a restaurant to have a mouthful there at

the time of billing you often see yourself robbed by some more amount than what you

enjoyed of , these extra amounts are indirect taxes, which are collected by the

intermediaries and when govt tax the income of the intermediaries this extra amount

goes in to governments kitty, hence as the name suggests these are levied indirectly on

common people.

Some examples of Indirect Taxes are-


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Value Added Tax-

When we pay an extra amount of price for the goods and services we consume or buy,

that extra amount of money is called as VAT. This taxes is about to be replaced by Goods

and Services Tax.

Current rate :

On agricultural goods-4%

On luxury items- 20%

Customs Duty :

Customs Duty is a type of indirect tax levied on goods imported into India as well as on

goods exported from India. In India, the basic law for levy and collection of customs duty

is Customs Act, 1962. It provides for levy and collection of duty on imports and exports.

Excise Duty :

An excise or excise tax is an inland tax on the sale, or production for sale, of specific

goods or a tax on a good produced for sale, or sold, within a country or licenses for

specific activities. Excises are distinguished from customs duties, which are taxes on

import.

Service Tax-

Service Tax is a tax imposed by Government of India on services provided in India. The

service provider collects the tax and pays the same to the government. It is charged on

all services except the services in the negative list of services.

Current rate-12.36%


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Acronyms Corners -

CBDTCentral Board of Direct Taxes

CBECCentral Board of Excise and Customs

FBTFringe Benefits Tax

STTSecurities Transaction Tax

GSTGoods and Services Tax

VATValue Added Tax

BRICKS BANK

The 6th BRICS summit is the sixth annual diplomatic meeting of the BRICS, a grouping of

major emerging economies that includes Brazil, Russia, India, China and South Africa.

It is hosted by Brazil, as the first host country of the current five-year summit cycle the

host city is Fortaleza.

The theme chosen for our discussions was "Inclusive Growth: Sustainable Solutions.

Leaders of the BRICS emerging market nations have agreed to create a multilateral New

Development Bank (NDB) for infrastructure needs.

The New Development Bank (NDB), formerly referred to as the BRICS Development

Bank, is a proposed multilateral development bank operated by the BRICS states (Brazil,

Russia, India, China and South Africa) as an alternative to the existing World Bank and

International Monetary Fund.

The Bank is setup to foster greater financial and development cooperation among the

five emerging markets. It would be headquartered in Shanghai, China and the first chief

executive will come from India.

What isNew Development Bank (NDB)?

It is a bank set up by the worlds leading emerging economies aimed at funding

infrastructure projects in developing nations.


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What is the contingent reserve arrangement (CRA)?

The five countries will set up a $100bn pool of currency reserves to help countries

forestall short-term liquidity pressures.

How will be the CRA be funded?

China, the regions largest economy, will contribute $41 bn to the CRA. Russia, India,

Brazil will contribute $18 bn each, while South Africa will contribute $5 bn.

Where will be the bank based?

The New Development Bank will be based in Shanghai, China.

How will it be governed?

India will preside over its operations for the first five years, followed by Brazil and then

Russia. It is scheduled to start lending in 2016.

How will it be funded?

The bank will begin with $50 bn divided equally between its five founder members.

Another $50 bn will come from new members.

New areas of cooperation to be explored

Mutual recognition of Higher Education Degrees and Diplomas

Labor and Employment, Social Security, Social Inclusion Public Policies

Foreign Policy Planning Dialogue

Insurance and reinsurance

Seminar of Experts on E-commerce.

ITS GLOBAL PEERS

1. International Monetary Fund (IMF)

History:

The IMF was conceived in July 1944 when representatives of 45 countries met in Bretton

Woods in the US to establish a framework for International economic cooperation.


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Mandate:

Its mandate to oversee the international monetary system and promote excahanhe

stability among its members countries.

Member Countries182

Employees2,300

HeadquarterWashington DC, US

2. World Bank

History

Conceived in July 1944, it is initially focused on electric power and transportation

projects, but later diversified its activities, acquiring new insights into the development

process.

Mandate:

It seeks to promote economic development projects of the worlds poorer countries

thorugh long term financing.

Member countries180

Employees7,000

HeadquarterWashington DC, US

3. Asian Development Bank (ADB)

History

Conceived in the early 1960s to foster economic growth and cooperation in the Asian

region, ADB opened on December 19, 1966 with 31 members.

Mandate:


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ADB provides loans for developing member countries in 5 core areas: infrastructure,

environment, regional cooperation and integration, finance sector development,

education.

Member Countries67

Employees3,062

HeadquarterManila, Philippines

Economic glossary

Union Budget-

Under Article 112 of the constitution, a statement of estimated receipts and

expenditure, called the Annual Financial Statement, has to be placed before Parliament

for each financial year.

This Statement is the main budget document. It is an estimate of the Governments

revenue and expenditure at the end of a fiscal year, which runs from April 1 to March31.

A Union Budget is the most comprehensive report of the Governments finances, in

which revenues from all sources and outlays to all activities are consolidated. The

budget also contains estimates of the Governments accounts for the next fiscal, called

budgeted estimates.

Capital Budget -

The capital budget consists of capital receipts and payments. Capital receipts are

Government loans raised from the public, Government borrowings from the Reserve

Bank and treasury bills, divestment of equity holding in public sector enterprises, loans

received from foreign Governments and bodies, securities against small savings, State

provident funds, and special deposits.

Capital payments refer to capital expenditures on construction of capital projects and

acquisition of assets like land, buildings machinery and equipment.


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It also includes investments in shares, and loans and advances granted by the Central

Government to State Governments, Government companies, corporations and other

parties.

Revenue Budget-

The revenue budget consists of revenue receipts of the Government and its

expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues

constitute taxes like income tax, corporate tax, excise, customs, service and other duties

that the Government levies.

The non-tax revenue sources include interest on loans, dividend on investments etc.

Revenue expenditure is the expenditure incurred on the day-to-day running of the

Government and its various departments, and for services that it provides.

It also includes interest on its borrowings, subsidies and grants given to State

Governments and other parties.

This expenditure does not result in the creation of assets. In case the difference

between revenue receipts and revenue expenditure is negative, there is a revenue

deficit.

It shows the shortfall of the Governments current receipts over current expenditure. If

the capital expenditure and capital receipts are taken into account too, there will be agap between the receipts and expenditure in a year. This gap constitutes the overall

budgetary deficit, and it is covered by issuing 91-day Treasury Bills, mostly held by the

Reserve Bank.

Revenue surplus is the excess of revenue receipts over revenue expenditure.

Fiscal Deficit -

This is the gap between the Governments total spending and the sum of its revenue

receipts and non-debt capital receipts.

It represents the total amount of borrowed funds required by the Government to

completely meet its expenditure. The gap is bridged through additional borrowing from

the Reserve Bank of India, issuing Government securities etc. Fiscal deficit is one of the

major contributors to inflation.


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Primary Defici -

The primary deficit is the fiscal deficit minus interest payments. It tells how much of the

Governments borrowings are going towards meeting expenses other than interest

payments.

Finance Bill -

The Government proposals for the levy of new taxes, alterations in the present tax

structure, or continuance of the current tax structure are placed before the Parliament

in this bill. The bill contains amendments proposed to direct and indirect taxes.

Direct and Indirect Taxes -

Direct taxes are levied on the incomes of individuals and corporates. For example,

income tax, corporate tax etc. Indirect taxes are paid by consumers when they buy

goods and services. These include excise duty, customs duty etc.

Some Other Terms

Central plan outlay -

It refers to the allocation of monetary resources among the different sectors in the

economy and the ministries of the Government.

Public account

The Government acts like a banker for transactions relating to provident funds, small

savings collection etc.

The funds that the Government thus receives from its bank like operations are kept in

the public account, from which the related disbursements are made.

These funds do not belong to the Government and have to be paid back to the persons

and authorities who have deposited them.

Ad-valorem dutiesThese are the duties determined as a certain percentage of the price of products.Balance of payments

Balance of payments is the difference between the demand for, and supply of, a

countrys currency on the foreign exchange market.


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Budget estimates

It is an estimate of fiscal and revenue deficits for the year. The term is associated with

the estimates of the Centres spending during the financial year and the income

received through taxes.

Capital receipt -

Loans raised by the Centre from the market. Government borrowings from the Reserve

Bank and other parties, sale of Treasury Bills, and loans received from foreign

governments form a part of capital receipt.

Other items that also fall under this category include recovery of loans granted by the

Centre to State Governments and proceeds from disinvestments of Government stake in

public sector undertakings.

Consolidated fund -

Under this, the Government pools all its funds together.

It includes all Government revenues, loans raised, and recoveries of loans granted.

All expenditure of the Government is incurred from the consolidated fund and no

amount can be withdrawn from the fund without authorisation of the Parliament.

Contingency fund -This is a fund used for meeting emergencies where the Government cannot wait for an

authorisation of the Parliament. The Government subsequently obtains Parliamentary

approval for the expenditure. The amount spent from the contingency fund is returned

to the fund later.

Monetary policy

This comprises actions taken by the central bank to regulate the level of money or

liquidity in the economy, or change the interest rates.


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RBI Grade - B Exam - A brief of Capital Market

Financial Market-

Any marketplace where buyers and sellers participate in the trade of assets such as

equities, bonds, currencies and derivatives. Financial markets are typically defined byhaving transparent pricing, basic regulations on trading, costs and fees and market

forces determining the prices of securities that trade.

Money Market-

A segment of the financial market in which financial instruments with high liquidity and

for very short time are traded. The money market is used by participants as a means for

borrowing and lending in the short term, from several days to just under a year. Money

market securities consist of negotiable certificates of deposit (CDs), Treasury bills,

commercial paper and repurchase agreements (repos).

Capital Market-

These are the financial market for buying and selling of funds for long terms, these

consists of Shares, Debentures, equities etc,

Capital market is regulated by- SEBI (Securities and Exchange Board of India)

Lets understand Capital Market instruments in deep :

Capital Market consists of two main blocks, they are-

Primary Market

Secondary Market


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Primary Market (New Issue Market)-

A market that issues new securities on an exchange. Companies, governments and other

groups obtain financing through debt or equity based securities.

Secondary Market-Secondary market is basically a reselling market , Here the stocks that are already sold in

the primary market are resold mostly by the stockholders or companies to gain more

returns.

Mr. Bye Bye (rival of Tata) decided to enter in the Retail industry for this he had 50

percent of funds with him, to raise the remaining amount he decided to take the route

of Primary market, He offered his company shares to public and this step of offering the

securities for the first time in the Capital market is called as Initial Public Offering (IPO),

He can raise the money by the following means-

Bonds and Debentures

The common man which invested in the bond agreement of Mr. Bye Byes company will

receive a bond/Debt agreement , this will say that the common man will get the same

amount of money plus interests by Mr. Bye after the specified time limit . The person

subscribing the Bond instrument does not have a ownership in the company. As a

debenture holder, you provide unsecured loan to the company. It carries a higher rate

of interest as the company does not give any collateral to you for your money. For this

reason bond holders receive a lower rate of interest but are more secure.

Shares/Equities-

Companies usually divide their capital into small parts of equal value. This smallest part

is known as a share. Companies usually issue shares in the public to raise capital. People

who buy or are allotted shares are called shareholders. If a person is subscribing the

equities issued by Mr. Bye then he will get the same amount of money that he

subscribed plus he will get the additional amount that will depand on the profit of the

company, equity means you are a part of the company and will get your due if the

company earns a big amount of profit in the financial year, but you are in a danger to

loose if the company does not do well, equities are more dangerous and high returns

oriented than the bonds.

ACRONYMS CORNER-

SEBI- Securities and Exchange Board of India

IPO- Initial Public Offerings


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Some Important Banking Notes

GDP:It is the money value of all the final goods and services produced within the

geographical boundaries of the country during a given period of time.

GNP:It refers to the money value of total output or production of find goods and

service produced by the nationals of a country during a given period of time.

Producers Price Index:It is the cost incurred by the producer in producing single unit in

terms of GDP. It does not include any indirect taxes.

Credit Control:By credit control we mean to regulate the volume of credit created by

banks in India. It is the principal function of Reserve Bank of India. The basic objective of

credit control mechanism is to realize both price stability and exchange stability in theeconomy. RBI uses two types of methods to control credit: (i) Quantitative Methods,

and (ii) Qualitative Methods.

1. Quantitative Measuresare used to control the volume of credit or indirectly to

control inflationary and deflationary pressures caused by expansion and

contraction of credit. These are also known as general credit measures. These

consist of Bank Rate, Cash Reserve Ratio, Statutory Liquidity Ratio and Open

Market Operations.

2. Qualitative Measures are used to control the quantum as well as purpose forwhich credits are given by banks. RBI uses measures like Publicity, Rationing of

Credit, Regulation of consumer credit, Moral suasion and Variation in margin

requirement for qualitative credit control.

Bank Rate: Bank rate is the rate at which the RBI is prepared to buy or re-discount

eligible bills of exchange or other commercial papers. In simple words, bank rate is the

rate at which RBI extends advises (Credit) to commercial banks. A change in the bank

rate will result in a change in the prime lending rate of banks and thus act as an

independent instrument of monetary control.

Cash Reserve Ratio (CRR):Cash reserve ratio is the cash parked by the banks in their

specified current account maintained with RBI. In other words, it is the percentage of

deposit (both demand and time deposit) which a bank has to keep with the RBI. RBI was

empowered to vary the CRR between 3% to 15%. But now there is no minimum limit of

CRR in India but the maximum limit is still retained at 15%. The purpose of reducing CRR

is to leave large cash reserve with banks so as to enable them to expand bank credit.


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Similarly increasing of CRR means squeezing the cash reserve of the banks and limits

their credit providing capacity.

Statutory liquidity Ratio (SLR):Statutory liquidity ratio is the liquid assets commercial

banks maintain with the RBI in the form of cash (book value), gold (current market

value) and balances in unencumbered approved securities. The maximum limit of SLR is

40% and minimum limit of SLR is 23% In India. RBI can change SLR from time to time.

Both CRR and SLR reduce or increase the capacity to expand credit to business and

industry. Thus both of these are anti-inflationary.

Open Market Operations (OMO):The buying and selling of eligible securities in the

money market by RBI for the purpose of curtailing or expanding the volume of credit. By

selling securities the RBI can absorb funds, and buying the securities can release funds

also into the market. The purpose of OMO is to influence the volume of cash reserves

with the commercial banks and thus influence the volume of loans and advances theycan make to the industrial and commercial sector.

Selective Credit Controls:Under the Banking Regulation Act 1949, section 21 empowers

RBI to issue directives to the banking companies regarding their advance in order to

check speculation and rising prices. The controls are selective as they are used to control

and check the rising tendency of price and hording of certain individual commodities of

common use. However, while imposing selective control, RBI takes care that bank credit

for production and transportation of commodities and exports is not affected. These are

mainly focused on credit to traders who use such credit for financing hoarding and

speculation. Since 1956-57 RBI is employing this method.

Prime Lending Rate (PLR):It is rate of interest of which commercial banks lend to their

prime high profile blue chip corporate borrowers. (From 1990s banks are free to

determine PLR).

Repo Rate:Repurchasing option is traded in this market for a short time periods. Repo

is Repurchasing by RBI.

Priority Sector Lending:Priority sector refers to those sectors of the economy whichmay not get timely and adequate credit in the absence of this special dispensation.

Typically, these are small value loans to farmers for agriculture and allied activities,

micro and small enterprises, poor people for housing, students for education and other

low income groups and weaker sections.


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Market Stabilization Scheme:It is a scheme under which RBI buys and sells Government

of India securities in order to control liquidity.

Money in Circulation:Money in use to finance current transactions as distinct from idle

money.

Investment Bank:A Bank that provides long term fixed capital for industry, generally by

taking up shares in limited companies.

Regional Rural Bank:It was established in 1975 under the provision of RRB Act 1976,

with a view to develop rural economy.

Lead Banking Scheme: Under this scheme all the nationalized banks and few private

sector banks were allowed specially and were asked to play the Lead Role. The lead

banks act as a leader to bring about co-ordination of cooperative banks, commercial

banks and other financial institutions in their respective demises to bring about rapid

economic development

CAMELS: Capital Adequacy, Asset Quality, Management, Earnings Liquidity and Systems.

Capital Adequacy Ratio (CAR):It is the ratio of total capital fund of a bank to its risk

weighted assets. It is an indicator of banks financial health.

Over Heating of Economy:When the supply is not able to keep phase with demand, it isas called over heating of economy. It leads to inflation and shortage goods.

Cost-push Inflation:General prices of goods and services in the economy rises due to an

increase in production cost. Such types of Inflation are caused by three factors (i) an

increase in wages, (ii) an increase in profit and (iii) imposition of heavy tax.

Demand- pull inflation:The most common cause of inflation is the pressure of ever-

rising demand on a less rapidly increasing supply of goods and services. The expansion in

aggregate demand may be the result of rapidly increasing private investment and/orspending government money for war or for economic development.

Forward Market Commission:It is a regulatory body for commodity futures, and

forward trade in India. It was set up under Forward Contract (Regulation) Act 1952. Its

headquarter is in Mumbai.


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CARE:Credit Analysis and Research Ltd. It was started in November 1993. It was set up

by IDBI.

ICRA:Investment Information and Credit Rating Agents of India Limited. It was

established in 1991. It primarily rates short, medium and long debt instruments. But,

since 1995 it has been doing equity rating also.

NSDL:National Securities Depository Limited

CDSL:Central Depository Services Limited.

Banking Act

Often in exams we come across questions related to banking acts, so we are providing

you a brief summary of some important acts and years in which they came in action.


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Some Key Financial Terms for Various Exams

APR:It stands for Annual Percentage Rate. APR is a percentage that is calculated on the

basis of the amount financed, the finance charges, and the term of the loan.

ABS:Asset-Backed Securities. It means a type of security that is backed by a pool of

bank loans, leases, and other assets.


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EPS:Earnings Per Share means the amount of annual earnings available to common

stockholders as stated on a per share basis.

CHAPS:Clearing House Automated Payment System. Its a type of electronic bank-to-

bank payment system that guarantees same-day payment.

IPO:Initial Public Offerings is defined as the event where the company sells its shares to

the public for the first time. (or the first sale of stock by a private company to the

public.)

FPO:Follow on Public Offerings: An issuing of shares to investors by a public company

that is already listed on an exchange. An FPO is essentially a stock issue of

supplementary shares made by a company that is already publicly listed and has gone

through the IPO process.

Difference:IPO is for the companies which have not been listed on an exchange and

FPO is for the companies which have already been listed on an exchange but want to

raise funds by issuing some more equity shares.

RTGS:Real Time Gross Settlement systems is a funds transfer system where transfer of

money or securities takes place from one bank to another on a real time. (Real time

means within a fraction of seconds.) The minimum amount to be transferred through

RTGS is Rs 2 lakh. Processing charges/Service charges for RTGS transactions vary from

bank to bank.

NEFT:National Electronic Fund Transfer. This is a method used for transferring funds

across banks in a secure manner. It usually takes 1-2 working days for the transfer to

happen. NEFT is an electronic fund transfer system that operates on a Deferred Net

Settlement (DNS) basis which settles transactions in batches. (Note: RTGS is much faster

than NEFT.)

CAR:Capital Adequacy Ratio. Its a measure of a banks capital. Also known as Capital

to Risk Weighted Assets Ratio (CRAR), this ratio is used to protect depositors andpromote the stability and efficiency of financial systems around the world. It is decided

by the RBI.

NPA:Non-Performing Asset. It means once the borrower has failed to make interest or

principal payments for 90 days, the loan is considered to be a non-performing asset.

Presently it is 2.39%.


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IMPS:Inter-bank Mobile Payment Service. It is an instant interbank electronic fund

transfer service through mobile phones. Both the customers must have MMID (Mobile

Money Identifier Number). For this service, we dont need any GPS-enabled cell phones.

BCBS:Basel Committee on Banking Supervision is an institution created by the Central

Bank governors of the Group of Ten nations.

RSI:Relative Strength Index.

IFSC code:Indian Financial System Code. The code consists of 11 characters for

identifying the bank and branch where the account in actually held. The IFSC code is

used both by the RTGS and NEFT transfer systems.

MSME and SME:Micro Small and Medium Enterprises (MSME), and SME stands for

Small and Medium Enterprises. This is an initiative of the government to drive and

encourage small manufacturers to enjoy facilities from banks at concessional rates.

LIBOR:London InterBank Offered Rate. An interest rate at which banks can borrow

funds, in marketable size, from other banks in the London interbank market.

LIBID:London Interbank Bid Rate. The average interest rate at which major London

banks borrow Eurocurrency deposits from other banks

ECGC:Export Credit Guarantee Corporation of India. This organisation provides risk as

well as insurance cover to the Indian exporters.

SWIFT:Society for Worldwide Interbank Financial Telecommunication. It operates a

worldwide financial messaging network which exchanges messages between banks and

other financial institutions.

STRIPS:Separate Trading for Registered Interest & Principal Securities.

CIBIL:Credit Information Bureau of India Limited. CIBIL is Indias first credit information

bureau. Whenever a person applies for new loans or credit card(s) to a financial

institution, they generate the CIBIL report of the said person or concern to judge the

credit worthiness of the person and also to verify their existing track record. CIBIL

actually maintains the borrowers history.


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CRISIL:Credit Rating Information Services of India Limited. Crisil is a global analytical

company providing ratings, research, and risk and policy advisory services.

AMFI:Association of Mutual Funds of India. AMFI is an apex body of all Asset

Management Companies (AMCs) which have been registered with SEBI. (Note: AMFI is

not a mutual funds regulator)

FCCB:Foreign Currency Convertible Bond. A type of convertible bond issued in a

currency different from the issuers domestic currency.

CAC:Capital Account Convertibility. It is the freedom to convert local financial assets

into foreign financial assets and vice versa. This means that capital account convertibility

allows anyone to freely move from local currency into foreign currency and back, or in

other words, transfer of money from current account to capital account.

BANCASSURANCE: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.

Balloon payment:Is a specific type of mortgage payment, and is named balloon

payment because of the structure of the payment schedule. For balloon payments, the

first several years of payments are smaller and are used to reduce the total debt

remaining in the loan. Once the small payment term has passed (which can vary, but is

commonly 5 years), the remainder of the debt is due - this final payment is the oneknown as the balloon payment, because it is larger thanall of the previous payments.

CPSS:Committee on Payment and Settlement Systems

FCNR Accounts:Foreign Currency Non-Resident accounts are the ones that are

maintained by NRIs in foreign currencies like USD, DM, and GBP.

M3 in banking:Its a measure of money supply. It is the total amount ofmoney

available in an economy at a particular point in time.

OMO:Open Market Operations. 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. Open market operations are the principal tools of monetary policy. RBI uses this

tool in order to regulate the liquidity in economy.


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Umbrella Fund:A type of collective investment scheme. A collective fund containing

several sub-funds, each of which invests in a different market or country.

ECS:Electronic Clearing Facility is a type of direct debit.

Tobin tax:Suggested by Nobel Laureate economist James Tobin, was originally defined

as a tax on all spot conversions of one currency into another.

Z scoreis a term widely used in the banking field.

POS:Point Of Sale, also known as Point Of Purchase, a place where sales are made and

also sales and payment information are collected electronically, including the amount of

the sale, the date and place of the transaction, and the consumers account number.

LGD:Loss Given Default. Institutions such as banks will determine their credit losses

through an analysis of the actual loan defaults.

Junk Bonds:Junk bonds are issued generally by smaller or relatively less well-known

firms to finance their operations, or by large and well-known firms to fund leveraged

buyouts. These bonds are frequently unsecured or partially secured, and they pay

higher interest rates: 3 to 4 percentage points higher than the interest rate on blue chip

corporate bonds of comparable maturity period.

ARM:Adjustable Rate Mortgage is basically a type of loan where the rate of index iscalculated on the basis of the previously selected index rate.

ABO:Accumulated Benefit Obligation, ABO is a measure of liability of pension plan of an

organisation and is calculated when the pension plan is terminated.

Absorption:A term related to real estate, it is a process of renting a real estate property

which is newly built or recently approved.

AAA:A type of grade that is used to rate a particular bond. It is the highest rated bondthat gives maximum returns at the time of maturity.

DSCR:Debt Service Coverage Ratio, DSCR is a financial ratio that measures the

companys ability to pay their debts.


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FSDC:Financial Stability and Development Council, Indias apexbody of the financial

sector.

ITPO:India Trade Promotion Organisation is the nodal agency of the Government of

India for promoting the countrys external trade.

FLCC:Financial Literacy and Counseling Centres.

ANBC:Adjusted Net Bank Credit is Net Bank Credit added to investments made by banks

in non-SLR bonds.

Priority sector lending:Some areas or fields in a country depending on its economic

condition or government interest are prioritised and are called priority sectors i.e.

industry, agriculture.

M0, M1, M2 AND M3:These terms are nothing but money supply in banking field.

BIFR:Bureau of Industrial and Financial Reconstruction.

FRBM Act 2003:Fiscal Responsibility and Budget Management act was enacted by the

Parliament of India to institutionalise financial discipline, reduce Indias fiscal deficit,

improve macroeconomic management and the overall management of the public funds

by moving towards a balanced budget.

The main objectives of FRBM Act are:-

1. To reduce fiscal deficit.

2. To adopt prudent debt management.

3. To generate revenue surplus.

Gold Standard:A monetary system in which a countrys government allows its currency

unit to be freely converted into fixed amounts of gold and vice versa.

Fiat Money:Fiat money is a legal tender for settling debts. It is a paper money that isnot convertible and is declared by government to be legal tender for the settlement of

all debts.

BCSBI: The Banking Codes and Standards Board of India is a society registered under the

Societies Registration Act, 1860 and functions as an autonomous body, to monitor and


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assess the compliance with codes and minimum standards of service to individual

customers to which the banks agree to.

OLTAS: On-Line Tax Accounting System.

EASIEST:Electronic Accounting System in Excise and Service Tax.

SOFA:Status of Forces Agreement, SOFA is an agreement between a host country and a

foreign nation stationing forces in that country.

CALL MONEY:Money loaned by a bank that must be repaid on demand. Unlike a term

loan, which has a set maturity and payment schedule, call money does not have to

follow a fixed schedule. Brokerages use call money as a short-term source of funding to

cover margin accounts or the purchase of securities. The funds can be obtained quickly.

Scheduled bank:Scheduled Banks in India constitute those banks which have been

included in the Second Schedule of RBI Act, 1934 as well as their market capitalisation is

more than Rs 5 lakh. RBI in turn includes only those banks in this schedule which satisfy

the criteria laid down vide section 42 (6) (a) of the Act.

FEDAI:Foreign Exchange Dealers Association of India. An association of banks

specialising in the foreign exchange activities in India.

PPF:Public Provident Fund. The Public Provident Fund Scheme is a statutory scheme ofthe Central Government of India. The scheme is for 15 years. The minimum deposit is Rs

500 and maximum is Rs 70,000 in a financial years

SEPA:Single Euro Payment Area.

GAAP: Generally Accepted Accounting Principles. The common set of accounting

principles, standards and procedures that companies use to compile their financial

statements.

Indian Depository Receipt:Foreign companies issue their shares and in return they get

the depository receipt from the National Security Depository in return of investing in

India.


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Hot Money:Money that is moved by its owner quickly from one form of investment to

another, as to take advantage of changing international exchange rates or gain high

short-term returns on investments.

NMCEX:National Multi-Commodity Exchange.

PE RATIO:Price to Earnings Ratio, a measure of how much investors are willing to pay

for each dollar of a companys reported profits.

CASA:Current Account, Savings Account.

CAMELS:CAMELS is a type of Bank Rating System. (C) stands for Capital Adequacy, (A)

for Asset Quality, (M) for Management ,(E) for Earnings, (L) for Liquidity and (S) for

Sensitivity to Market Risk.

OSMOS:Off-site Monitoring and Surveillance System.

Free market:A market economy based on supply and demand with little or no

government control.

Retail banking:It is mass-market banking in which individual customers use local

branches of larger commercial banks.

Eurobond:A bond issued in a currency other than the currency of the country or market

in which it is issued.

PPP:Purchasing Power Parity is an economic technique used when attempting to

determine the relative values of two currencies.

FEMA Act: Foreign Exchange Management Act, it is useful in controlling HAWALA.

Hawala transaction:Its a process in which large amount of black money is converted

into white.

Teaser Loans:Its a type of home loans in which the interest rate is initially low and then

grows higher. Teaser loans are also called terraced loans.

ECB: External Commercial Borrowings, taking a loan from another country. Limit of ECB

is $500 million, and this is the maximum limit a company can get.


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CBS:Core Banking Solution. All the banks are connected through internet, meaning we

can have transactions from any bank and anywhere. (e.g. deposit cash in PNB, Delhi

branch and withdraw cash from PNB, Gujarat)

CRAR: For RRBs it is more than 9% (funds allotted 500 cr) and for commercial banks it is

greater than 8% (6000 cr relief package).

NBFCs:NBFC is a company which is registered under Companies Act, 1956 and whose

main function is to provide loans. NBFC cannot accept deposit or issue demand draft like

other commercial banks. NBFCs registered with RBI have been classified as AssetFinance

Company (AFC), Investment Company (IC) and Loan Company (LC).

IIFCL: India Infrastructure Finance Company Limited. It gives guarantee to infra bonds.

IFPRI:International Food Policy Research Institute. It identifies and analyses policies for

meeting the food needs of the developing world.

Currency swap: It is a foreign-exchange agreement between two parties to exchange

aspects (namely the principal and/or interest payments) of a loan in one currency for

equivalent aspects of an equal in net present value loan in another currency. Currency

swap is an instrument to manage cash flows in different currency.

WPI:Wholesale Price Index is an index of the prices paid by retail stores for the

products they ultimately resell to consumers. New series is 2004 2005. (The new serieshas been prepared by shifting the base year from 1993-94 to 2004-05). Inflation in India

is measured on WPI index.

MAT:Minimum Alternate Tax is the minimum tax to be paid by a company even though

the company is not making any profit.

Future trading:Its a future contract/agreement between the buyers and sellers to buy

and sell the underlying assets in the future at a predetermined price.

Reverse mortgage:Itsa scheme for senior citizens.

Basel 2nd norms:BCBS has kept some restrictions on bank for the maintenance of

minimum capital with them to ensure level playing field. Basel II has got three pillars:

Pillar 1- Minimum capital requirement based on the risk profile of bank.


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Pillar 2- Supervisory review of banks by RBI if they go for internal ranking.

Pillar 3- Market discipline.

Microfinance institutions:Those institutions that provide financial services to low-

income clients. Microfinance is a broad category of services, which includes microcredit.

Microcredit is provision of credit services to poor clients.

NPCI:National Payments Corporation of India.

DWBIS:Data Warehousing and Business Intelligence System, a type of system which is

launched by SEBI. The primary objective of DWBIS is to enhance the capability of the

investigation and surveillance functions of SEBI.

TRIPS:Trade Related Intellectual Property Rights is an international agreement

administered by the World Trade Organisation (WTO) that sets down minimumstandards for many forms of intellectual property (IP) regulation as applied to nationals

of other WTO Members.

TRIMs:Trade Related Investment Measures. A type of agreement in WTO.

SDR:Special Drawing Rights, SDR is a type of monetary reserve currency, created by the

International Monetary Fund. SDR can be defined as a basket of national currencies.

These national currencies are Euro, US dollar, British pound and Japanese yen. Special

Drawing Rights can be used to settle trade balances between countries and to repay theIMF. American dollar gets highest weightage.

LTD:Loan-To-Deposit Ratio. A ratio used for assessing a banks liquidity by dividing the

banks total loans by its total deposits. If the ratio is too high, it means that banks might

not have enough liquidity to cover any fund requirements, and if the ratio is too low,

banks may not be earning as much as they could be.

CAD:Current Account Deficit. It means when a countrys total imports of goods, services

and transfers is greater than the countrys total export of goods, services and transfers.

LERMS:Liberalized Exchange Rate Management System.

FRP:Fair and Remunerative Price, a term related to sugarcane. FRP is the minimum

price that a sugarcane farmer is legally guaranteed. However sugar Mills Company gives

more than FRP price.


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STCI:Securities Trading Corporation of India Limited was promoted by the Reserve Bank

of India (RBI) in 1994 along with Public Sector Banks and All India Financial Institutions

with the objective of developing an active, deep and vibrant secondary debt market.

IRR:Internal Rate of Return. It is a rate of return used in capital budgeting to measure

and compare the profitability of investments.

CMIE:Centre for Monitoring Indian Economy. It is Indias premier economic research

organisation. It provides information solutions in the form of databases and research

reports. CMIE has built the largest database on the Indian economy and companies.

TIEA:Tax Information Exchange Agreement. TIEA allows countries to check tax evasion

and money laundering. Recently India has signed TIEA with Cayman Islands.

Contingency Fund:Its a fund for emergencies or unexpected outflows, mainly

economic crises. A type of reserve fund which is used to handle unexpected debts that

are outside the range of the usual operating budget.

FII:Foreign Institutional Investment. The term is used most commonly in India to refer

to outside companies investing in the financial markets of India. International

institutional investors must register with the Securities and Exchange Board of India to

participate in the market.

P-NOTES:P means participatory notes.

MSF:Marginal Standing

Banking Awarness For Ibps Po 2014

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