Contents

What is an interview? .................................................................................... 3

Questions which are often asked and may be asked in the Interview ................ 5
Indian Banking System .................................................................................. 9
Eco-Terms................................................................................................... 14
List of Various Committees and their Focus Area ........................................ 21
Recent Working Groups and Committees by RBI ......................................... 22

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Banks & Slogan........................................................................................... 24
Key Banking and Financial Terms ................................................................ 24
International Organisations .......................................................................... 28
International Organisations and Headquarters .............................................. 33

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 WHAT IS AN INTERVIEW?
An interview is simply a tool used by a potential employer to assess a candidates ability to
perform a role. The interview will normally be the first time that the employer has the opportunity
to meet you. They need to assess whether or not you have the qualities to perform the role
competently, the experience that you have so far in a similar role, and also whether they like you as
a person and whether you are likely to fit into the team environment. It is also your chance to find
out if you want to work for the company, so it is a two-way process.
There are different kinds of interviews though, and some jobs will require more than one, and
there may be more than one interview, so its just as well to be prepared for this eventuality.
Face-to-face interviews-Thisisthekindofinterviewweexpectwheninvitedtoaninterview.
It may be one-to-one between you and the interviewer, or you may sometimes find that there are
two interviewers, such as a functional specialist and a member of the resourcing or HR team. Dont
assume the interviewer has read your CV. Go through it with them, dont go into excessive details,

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but do engage them in conversation.
Panel interviews-Panelinterviews,whereseveralpeopleinterviewyouatoncearecommon
for positions of importance, and it is particularly popular in the public sector. Recognise the
different roles that may be adopted by each member of the panel. Usually there will be a chairperson
to coordinate the questions and it is quite common for at least one panel member to adopt a bad
cop role - where their questions may seem abrupt, even rude. This is a deliberate tactic to see how
you react. Try and stay calm, dont let them rile you. If they talk over you, stop and let them ask
their next question. If you know it is a deliberate tactic, you can behave appropriately.

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Telephone interviews: Telephone interviews are increasingly used by companies as an integral
part of the recruitment process, often at the early stage of selection. If you are offered a telephone
interview, the most important fact to remember is that the employer wants to find out the same
information as they would face-to-face, so your preparation needs to be just as thorough. These
interviews are usually carried out by someone in HR person who may know very little about the
position and technical terms related to a specific job. Make sure to use clear vocabulary, and avoid
buzzwords and jargon while answering their questions, but be descriptive; you are trying to paint a
picture with words, since the interviewer has no visual clues of you.
Group interviews: Several candidates are present and will be asked questions in turn. A
group discussion may be encouraged and you may be invited to put questions to the other candidates.
Sometimes there will be role plays or group tasks, where you will actually have to co-operate with
people who want the same job as you. This is particularly common for jobs that involve team
working skills. Group interviews are designed to see how you interact with other people so be
courteous to your fellow candidates.
Sequential interviews: Here you may face several interviews in turn, with a different
interviewer each time. Usually, each interviewer asks questions to test different sets of skills.
However, you may find yourself answering the same questions over and over. If this does happen,
make sure you answer each one as fully as the time before and be consistent.
When you are invited to an interview it is perfectly okay to ask what form it will take, that way
you will be more prepared for whatever they throw at you.
 Questions which are often asked and may be asked in the Interview
NAME & SURNAME
1. Can you explain the meaning of your name?
2. Your surname appears to be unusual and unheard, could you explain?
3. Your father has Choudhary as surname. How is that you have not inherited the same?.
4. You are prepared to inherit your fathers property whereas you are discarding his surname?
5. What is the harm if your surname or name depicts your caste? After all, marriages and votings are fixed on
caste basis, dont you agree?
6. Your name has similarity to that of such-and-such great man, what about his qualities?
PLACE OF ORIGIN
7. You belong to this (XYZ) district which we believe is the most backward district of your state. What
according to you are the main reasons of its backwardness?
8. Name and explain some of the development programmes of the government in your district.
9. If you are posted in the district (XYZ) what would be your priorities in terms of plan and actions?

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10. You come from the state which has the lowest per capita income followed by the highest population
growth. Can you explain the reasons?
11. Where would you prefer your posting in a backward state or in your home state?
12. Do you think growth of agriculture depends on literacy?
13. How is the economy of your district?
14. A new class of rural rich is emerging very rapidly. Suggest few steps to organise their wealth in the main
structure of national economy.
HOBBIES

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15. You have mentioned travelling as your hobby. How often do you travel?
16. On being selected you will not be able to carry on with your hobby of travelling, will you?
17. Travelling is a curse and not a pleasure in our country. Please comment.
18. Recently one of the Indian States has become International Tourists Choice. Do you know that?
19. You have mentioned social service as your hobby. Is there any possibility of integration of social service
and Banking Service?
20. Whom would you hold responsible politicians, bureaucrats or public for the poor state of affairs as
far as Social Service is concerned?
21. In which way can banking sector contribute towards social service in the society?
22. What is an NGO? How does it function?
23. Sports being your hobby, do you think the match-fixing episode has virtually wiped out public interest in
cricket matches?
24. How can you pursue your gardening hobby in a metropolitan city as there is hard:/ any space left?
ACADEMIC QUALIFICATION (GENERAL TYPE QUESTIONS)
25. You have consistently good academic records including a Doctorate. Why dont you join teaching profession?
26. You are an engineer from a premier Institution. In fact, banking job may not be suitable to you. Dont you
consider it as a national loss?
27. Throughout your academic career you have a science background, whereas banking service is a commercial
job. How can you find it suitable?
28. You have high first division in school, high second class in class XII, and second class in Graduation. It is
in fact in 10 descending order. What if this continues even in your job.
29. You have changed from Science Stream to Humanities in Graduation securing drastically low marks in
graduation. Your decision was wrong, do you agree?
30. We find your academic results quite inconsistent and varying from 50% to 59%; Can you explain the reasons
for the same?
BANKING & MISCELLANEOUS:
31. Which is more important for banks social obligatiton or commercial progress? Can you differentiate
between the two?
32. As far as consumer banking Is concerned foreign banks are putting up new challenge to the Indian Banks.
Do you agree? Why?
33. What is the basic difference between Mutual Funds and Banks?
34. What significant role does RBI play in controlling banks in our country?
35. Why do banks still charge interests on loans if they are to abide by socialistic principle?

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36. Have you ever heard the phrase Commanding Heights?
37. Mention a few important roles of the rural banks in your area.
38. What are your strengths and weaknesses?
39. Where do you desire to see yourself after 20 years?
40. Are you confident that you will be selected?
41. What will you plan to do it you are not selected?
42. Who is the person in your life who has inspired and influenced you to a very great extent?
43. Explain few positive impacts of Foreign Banks on Indian banking system.
44. Do you think our rural sectors are being neglected due to the competitions between the foreign and the

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Indian Banks?
45. What is disinvestment policy? Should we open, also this door to, the foreign organisations?
BANKING, FINANCE AND ECONOMY
1. Explain the following and their current position
(i) Bank Rate
(ii) CRR
(iii) SLR
(iv) CAR
(v) PLR
(vi) SDR
(vii) Repo Rate
2. Why Benchmark PLR has been in the news recently?
3. How much is the Benchmark PLR of this bank?
4. What were the reason of Nationalisation of Banks?
5. What were the recommendation of Narsimhan Committee?
6. Narsimhan Committee is related to which field?
7. What is Weak Bank, Narrow Banking, Local Area Bank & Lead Bank?
8. What is Merchant Banking & Universal Banking?
9. What is the difference between Banks and Non-Banking Financial Institutions?
10. What is the difference between SBI and Nationalised Banks?
11. Is SBI Nationalised Bank? If not then why?
12. Who is the Chairman of this bank?
13. What are the main reason to Introduce RRBs?
14. What is Scheduled Bank?
15. What are Basel II Norms?
16. What is the purpose of Service Area Approach?
17. What is the Single Window System in a bank?
18. Wnat is the current inflation position in India?
19. What is the difference between Monetory and Fiscal Policy?
20. What are the main features of Current Monetory Policy?
21. Who is the Governor of RBI?
22. What are the functions of RBI?
23. How Bank creates credit?
24. What is credit control policy of RBI?
25. What is Open Market Operation?

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26. What is a Bank and what are the functions of a Bank?
27. What is Branch Banking?
28. How can we reduce NPAs?
29. Two major problems of bank at present? How would you handle them?
30. In which states there is no RRBs?
31. Where is the Head Office of RBI?
32. What is the difference between the One rupee note and the Two rupee note?
33. How Banks are helpful in the development of an industry?
34. How many public sector banks are there in India?

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35. What is banking Ombudsman scheme?
36. What were the reasons for nationalising the banks in India?
37. Is there any possibility of Nationalising some more banks. If yes then why? If not then why?
38. How many types of Cheque are there in banks?
39. If a party makes payment to you with two options either Cheque or Draft then what would you prefer and
why?
40. Tell us 5 major import items of India?
41. Which cheque works just like a currency note?
42. What will you do in case a cheque is lost by you?
43. What is clearing house?
44. What is Grashams Law ?
45. Bad currency throws out of circulation good currency what do you understand by this statement?
46. What is Inflation, Deflation, Disinflation, Stagflation, Mild Inflation, Galloping inflation?
47. How can Inflation be controlled?
48. What are the causes of Inflation?
49. Difference between Black money and Black Income?
50. What are Parallel and Underground Economy?
51. What are the causes of the creation of Black money? How can we control it?
52. What is Devaluation of Currency?
53. What do you know about Finances commission of India?
54. What is the difference between Bonds and Shares?
55. Distinguish between Money market and Capital market?
56. Which/ Who has controlling authority of Money market?
57. Which/Who has controlling authority of Capital market?
58. What is Near money, Dear money, Cheap money, Hot money?
59. Define Stock Exchange? Why it is necessary in a capitalist Economy?
60. How is business transacted in a stock exchange?
61. What is Mutual Fund?
62. Tell us 5 major Export items of India?
63. If RBI increases Bank Rate or CRR, does it effect economy? If Yes then how?
64. What is Inflationary GAP?
65. What are the main objectives of Monetary policy?
66. What is NPA?
67. How can you reduce NPAs?
68. Difference between Gross NPAs and Net NPAs?

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69. What are the new norms for NPA?
70. Who is the Highest Officer of RBI?
71. What is Indian Currency?
72. Why the banks like to open their branches in towns and cities specially private banks, while the real
Wealth of the country is in the villages?
73. If we appoint you in our Rural branch, would you like to live in a village?
74. At this time you are giving your acceptance, but as soon as you are posted in a rural branch of the bank,
you would make efforts for your transfer to a city branch isnt it?
75. What are the sources of a bank through which it obtains its funds for operation?

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76. In this era of competition with private players, what will be the future of public sector banks after 10
years?
77. Is there any need of RRBs in India?
78. Why a bank issue IPO?
79. What is supply of money?
80. What is Mobile Banking?
81. Main features of 10th five year plan?
82. Who is the head of planning commission?
83. Who is the head of National Development Council?
84. Who is the head of Finance Commission?
85. What is Vote on Account?
86. Tell us about main features of the Budget?
87. How is Current Economic position of India?
88. What are the Singapore issues?
89. Tell us about FOREX and its present condition?
90. What is Rupee appreciation?
91. Banking scenario of last 10 years?
92. What is VRS scheme?
93. Raising forex is beneficial to India or not?
94. Important events in last one year in banking or economic sector?
95. What is SEB!?
96, What is IRDA & PFRDA?
97. What do you know about credit Rating agencies in India?
98. How is working culture in Private Banks and how it is different from Public sector banks?
99. What is Fiat money?
100. Define Call money market?
101. What is the difference between Credit and Debit Card?
102. How ATM works?
103. What is digital signature?
104. What is e-banking concept?
105. Is the privatisation of banking correct?
106. What is Easy Money?
107. What is Balanced Budget?
108. What is Disguised Unemployment?
109. What is Duopoly?

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110. What is Effective Demand?
111. What is Embargo?
112. How the poverty is analysed in India?
113. Where the head quarter of IMF is situated?
114. What is Consolidated and Contingency fund of India?
115. What is the financial year of RBI?
116. Explain the present condition of Balance of payment and Balance of Trade?
117. What is Bull and Beer?
118. What is Free Trade 3 Concept?

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119. What is the difference between Saving and Current Deposits?
120. When was RBI embellished?
121. What is NABARD? Tell us about its functions and where it has its head office ;
122. What are the special features of new Exim Policy?
123. What has been the economic growth target set by 10th five year plan?
124. Being a Branch Manager of a bank how would you improve the day to day work and services of that
branch?
125. Which steps would you take to prevent forgery/looting in your branch?
126. What is Subsidy?
127. What is Overdraft facility?
128. What is Priority sector lending?
129, What is CAMELS rating in banks?
130. What is RIDF?
131. What are the challenges before banking sector in present time?
132. What is the future of banking sector?
 BSC Academy
Indian Banking System

A bank is an organisation that provides various financial services, for example keeping or lending money.

Structure of Organised Indian Banking System

The organised banking system in India can be classified as given below.

Indian Banking System

Development Financial Institutions

National Bank for Agricultural Export-Import Bank of Industrial Reconstruction National Housing Small Industrial
and Rural Development India (EXIM Bank) Bank of India (IRBI) Bank (NHB) Development Bank
(NABARD) of India (SIDBI)

K Commercial Banks

Foreign Commercial
Regional Rural
Banks (RRBs)

Indian Commercial
Banking Institutions

Cooperative Banks

State Co-operative Banks

Land Development
Banks (LDBs)

State Land Development

Banks (SLDBs)
Industrial Development
Banks (IDBs)

Banks Banks

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Central/District All India State Level
Co-operative Banks
Primary Land Development
Banks (PLDBs)
Primary Agriculture
Public Sector Banks Private Sector Banks Credit Societies
(PACS)

State Bank Group 19 Nationalised Banks Industrial Finance Industrial Credit and
Corporation Investment Corporation
of India (IFCI) of India (ICICI)

State Bank of India Six Subsidiary Banks

+
IDBI Bank Ltd
State Financial State Industrial Development
Corporation (SFCs) Corporations (SIDCs)

General Awareness l 8
History of Indian Banking System
Modern commercial banking started in India with the
setting up of the First Presidency Bank, the Bank of Bengal,
in Calcutta in 1809. Two other Presidency Banks were set up
in Bombay and Madras in 1840 and 1843 respectively. These
were private shareholders banks, though the East India
company also had a share in capital of each of them. these
three banks were merged into Imperial Bank of India in 1921.
The Allahabad Bank and the Punjab National Bank were
established in 1865 and 1894 respectively.
Classification of Commercial Banks
The commercial banking institutions of the country can
be divided into two groups:
(A) Scheduled Banks: Those banks are scheduled banks
which have been included in the Second Schedule of Reserve
Bank Act, 1934. The banks included in this scheduled list
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should fulfil two conditions:
(1) The paid up capital and collected funds of bank should
not be less than Rs 5 lakh.
(2) Any activity of the bank will not adversely affect the
interest of depositors.
Every scheduled bank enjoys following facilities:
(1) Such bank becomes eligible for obtaining debts/loans
on bank rate from RBI.
(2) Such bank automatically acquires the membership of
clearing house.
(3) Such banks also get the facility of rediscount of first
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class exchange bills from RBI. This facility is provided
by RBI only if the scheduled bank deposits an average
daily cash fund with RBI which is decided by RBI itself
and presents the recurring statements under the
provisions of RBI Act, 1934 and Banking Regulation Act,
1949.
(B) Non-Scheduled Banks: The banks which are not
included in the list of scheduled banks are called non-
scheduled banks. The number of non-scheduled banks is
continuously declining. Such non-scheduled banks also have
to follow CRR conditions. But such banks can have these
funds with themselves as no compulsion has been made on
non-scheduled banks to deposit CRR funds with RBI. These
non-scheduled banks are not eligible for having loans from
RBI for meeting their day-to-day general activities but under
emergency conditions these banks can be granted loans by
RBI.
Co-operative Banks
Co-operative banks in India also perform fundamental
banking activities but they are different from commercial
banks. Commercial banks have been constituted by an Act
passed by parliament while co-operative banks have been
constituted by different States under various Acts related to
co-operative societies of various states. Co-operative bank
organisation in India has three tier set up. State Co-operative
Bank is the apex co-operative institution in the state. Central
or District Co-operative Bank works as district level. At the
lowest level co-operative set-up is Primary Credit Agency
which works at village level.
Commercial banks have been constituted under unitary
basis and every commercial bank has been given authority to
seek refinance facility from RBI while only State Co-operative
Bank has been provided this facility under co-operative
banking structure.
Commercial bank can establish its branches in any
district/state of the country while, contrary to it, co-operative
bank can operate its activities only within limited area. For
example, District Co-operative Bank can perform banking
activities within the boundaries of the concerned district.
Similarly, Primary Credit Societies can perform banking
services within concerned villages. Co-operative banks can
not open their branches in foreign countries while commercial
banks can do that.
Banking Regulation Act 1949 is fully applicable to all
commercial banks while it is partially applicable to co-
operative banks. In other words, RBI has partial control on
co-operative banks.
Co-operative banks work on principles of co-operation
while commercial banks adopt pure commercial principles in
their operation. That is the reason why co-operative banks
succeed in getting financial assistance from RBI on
concessional rate.
Urban Co-operative Bank
There were 1811 Primary (urban) Co-operative Banks in
March 1998 working in the country with their 5229 offices.
Primary Co-operative Banks (PCBs) have to disburse 60% of
their total advances to primary sector and at least 25% to
weaker section of the society.
Primary Agriculture Credit Societies
These societies provide short term credit facilities to
agriculture sector. Minimum 10 persons of a village (or area)
can form a primary credit society. These societies grant short-
term loans (generally one year period) for productive activities
but this period can be extended upto 3 years under special
circumstances.
The various reconstruction and revival programmes for
PCSs adopted by Indian Government and RBI have
considerably reduced the number of primary credit societies
over past two decades. There were 161000 PCSs in 1970-71
which got reduced in 88000 in 1994-95, but again it increased
to 93000 in 1995-96. The amount of granted loans by these
PCSs has gone up at a cumulative speed.
Central (or District) Co-operative Bank
The working area of these banks is limited to one district
only. Central Co-operative Bank can be divided into two parts:
1. Co-operative Banking Union
2. Mixed Central Co-operative Bank
The membership of Co-operative Banking Union is given
to co-operative societies only, while the membership of mixed
central co-operative bank can be granted to both co-operative
societies and individuals. Generally all states in India are
having central co-operative banks with mixed membership
and are providing sufficient financial assistance to both PCSs
and individuals.
Central Co-operative Banks get loans from State Co-
operative Bank and give loans to Primary Credit Societies.
The duration of such loans vary from one year to three years.
In this way Central Co-operative Bank plays a bridge role
between State Co-operative Banks and Primary Credit
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Societies. At the end of June 1995 there were 352 Central Co-
operative Banks working in the country.
State Co-operative Bank (SCB)
It is the apex co-operative bank of the state. It grants
loans to central Co-operative Banks and regulates their
activities. State Co-operative Bank gets loans from RBI. Hence,
SCB acts as a link between RBI and Central co-operative
banks.
State Co-operative Bank raises its current capital by
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shares and loans. RBI generally provides loans to SCB on
interest rate, one or two per cent lower than bank rate.
At present 28 State Co-operative Banks are working in
the country.
Note: State Co-operative Banks and District Central Co-
operative Banks are regulated by the Rural Planning and
Credit Department as RBI and supervised by NABARD.
Regional Rural Banks
Regional Rural Banks (RRBs) were established on 2nd
October 1975 under the provisions of the RRB Act 1976 with
a view to develope the rural economy. Initially, five RRBs
were set up in the distrct of Moradabad and Gorakhpur
(UP), Bhiwani (Haryana), Jaipur (Rajasthan) and Malda
(West Bengal).These were sponsored by Syndicate
Bank,State Bank ofIndia,Punjab National Bank,United
Commercial Bank and United Bank of India. Capital share
being 50% by the central government, 15% by the state
government and 35% by the scheduled bank.
Though, RRB were initially intended to support
productive activities in the rural areas. With effect from April
1997 the concept of priority sector lending was made
applicable to RRBs. Similarly, the interest rates on term
deposits offered and interest rates on loans charged by RRBs
have also been freed.
RRBs are working in all states of the country except
Sikkim and Goa.
NABARD gives short term and medium term loans to
the RRBs. South Malabar Gramin Bank, (SMGB) a regional
rural bank (RRB) sponsored by Canara Bank is the largest
among the 82 RRBs in the country in term of total business.
Uttar Bihar Gramin Bank sponsored by Central Bannk of
India, is one of the largest regional rural bank in india in terms
of branch network, staff strength and area. Prathama Bank,
the first Regional Rural Bank of the country was established
on 2nd Otcober, 1975 with its Head Office at Moradabad in
terms of the ordinance issued by the Government of India in
1975. It was sponsored by Syndicate Bank.
The sources of funds of RRBs comprise of owned fund,
deposits, borrowings from NABARD, Sponsor Banks and
other sources including SIDBI and National Housing Bank.
Various committees that have been associated with RRBs
are Sardesai Committee, Dantawala Committee, Kelkar
Committee, Bhandari Committee, Narsimhan Committee, K
Basu Committee,Vyas Committee, Ranrajan Committee, etc.
In September 2005, the govt of India initiated the process
of amalgamation of RRBs. This, it claims, would help in
consolidating and strengthening RRBs. The process is now
almost complete resulting in a decline in the total number of
RRBs to 82 as on 1 January 2012.
Development Banks
Development banks are specialised financial institutions
which perform two functions: (i) providing medium and long
term finance to private entrepreneurs; and (ii) performing
various promotional roles conductive to economic
development. Though development banks provide finance
like banks do but they are different from commercial banks in
following ways: (i) they do not seek or accept deposits from
the public as ordinary banks do; (ii) they provide medium
and long-term finance whereas commercial banks provide
short term finance; and (iii) they do not merely provide long-
term finance like any other term lending institution but as
development banks their main role is promotion of economic
development by way of promoting investment and enterprise
in their priority areas.
Industrial Finance
The sources of industrial finance are: (i) share capital, (ii)
debentures, (iii) ploughing back of profits. (iv) public, deposits,
(v) commercial banks, and (vi) other financing institutions.
Share Capital: Most industrial undertakings are set up
as joint stock companies under the Companies Act, 1956.
According to this Act companies may issue two types of
shares for building up fixed capital, namely preference shares
and ordinary shares (also called risk shares). Authorised
capital is obtained mostly through the issue of ordinary shares
which varies between 45% and 98% in different industries.
Debentures: debentures are meant to attract investors
who are not willing to risk their capital and also feel satisfied
with a regular income. According to RBI, at present the share
of debentures in the total capital of companies is about 10%.
Ploughing Back of Profits: The main source of capital
formation in the private sector has been ploughing back of
profits earned.
Public Deposits: In western countries, industrial units
do not obtain finance through public deposits. The main
reason for the emergence of this practice in India is the
relatively delayed development of banking.
Commercial Banks: According to the traditional banking
notions, banks should not grant any term advances on the
basis of short-term deposits obtained from the public in
general. This is why commercial banks are generally interested
in short-term credit only and shy away from long term
investment in industry. Another reason for banks tendency
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to stay away from industries is that the Indian banking
structure is a legacy of the British banking structure which
had a similar tendency. Nevertheless, the share of industrial
finance in total credit made available by commercial banks is
continuously rising.
Institutional Finance for Industries: The Industrial
Financial Corporation Enquiry Committee, 1953, argued in its
report that establishment of financial institutions was essential
to meet the long-term credit requirements of industry. This
was because the capital market was underdeveloped and
commercial banks were not interested in fulfilling the credit
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needs of industry. The major financial institutions developed
in India for the purpose of granting industrial finance are as
follows.
Reserve Bank of India (RBI)
The RBI was established under the Reserve Bank of
India Act, 1934 on 1st April 1935. It was nationalised on 1st
January 1949. It is the Central Bank of India.
The monetary functions of the RBI include control and
regulation of money and credit, control of foreign exchange
operations: acting as banker to the Government, bankers
bank and lender of the last resort.
The non-monetary functions of the RBI are related to
the promotion of sound banking system. The RBI is
instrumental in supervising branch expansion, management
and methods of working and regulation and control of the
banking system as a whole.
Functions of RBI
Issue of Currency: The Reserve Bank has the sole right
of note issue. This authority is given because the Reserve
Bank is charged with the responsibility of providing adequate
supply of currency for facilitating transactions of the
Government and the exchange and remittance requirements
of banks and the public. This covers currency notes of every
denomination, other than one-rupee coins and notes and
subsidiary coins which are issued by finance ministry under
government of India but their distribution is the sole
responsibility of RBI.
Banker to Government: The Reserve Bank acts as the
banker to the Central Government as also to the governments
of the constituent units of Indias federal system. The bank
has the obligation to transact the banking business of the
Government of India and accordingly performs the following
functions: (a) accepts money on account of the government;
(b) makes payment on its behalf; and (c) carries out exchange
remittances and other banking operations, including the
management of public debt. The bank performs similar
functions on behalf of the State Governments by virtue of
agreements entered into with them.
Bankers Bank: The Reserve Bank acts as a banker to
other banks. Banks are required to maintain a certain
percentage of their deposits with the RBI. The minimum cash
requirements can, however, be changed by the Reserve Bank
to regulate credit. The Reserve Bank also provides finance to
scheduled banks. They can borrow on the basis of eligible
securities. Besides, financial accommodation is provided in
times of need or stringency in the money market. This help is
rendered through rediscounting (sale and purchase of
government securities) of bills of exchange. Since the
Reserve Bank is always ready to come to the aid of banks, it
also functions as the lender of the last resort. In other words,
even when banks fail to get finances anywhere, they can
look to the Reserve Bank and get it from there.
Controller of Credit: The Reserve Bank functions as
the controller of credit. As such it regulates the quantity of
credit and the rate at which it is made available. Thus, it does
through the use of general and selective controls. For general
quantitative control, the instruments used are: Open Market
Operations; Variable Reserve Requirements and the Bank
Rate. The selective control of credit is practised through
specifying the purposes for which credit is to be given and
the margins to be maintained in respect of secured advances.
In addition the Reserve Bank has been relying on the method
of moral suasion, i.e. persuading banks through letters,
meetings, etc, about the need for following the course desired
by the Reserve Bank.
Custodian of Foreign Exchange Reserves and Exchange
Management: One of the essential central banking functions
of the Bank is that of maintaining the external value of the
rupee. For this purpose it holds most of the nations foreign
exchange reserves. Primarily this aim is achieved by
appropriate monetary and fiscal policies, but for planning in
India it is being done with trade policy bearing upon export
and import, as also exchange management. The underlying
principle is to regulate demand by the national for foreign
exchange as also the disposal by them of the foreign exchange
earned.
Development and Promotional Functions: Besides
performing the essential functions of a central bank, Reserve
Bank has been doing valuable work in aiding development,
and promoting saving and banking habits. These tasks are
performed through a variety of means by the Bank.
Informational and Research Functions: In the
performance of its various functions, the Reserve Bank
undertakes collection and dissemination of information, and
conducts research is this field. As the bankers bank, banker
to the government and the countrys exchange authority, it
issues Banks weekly statements of accounts and the annual
balancesheet. Besides, the Bank issues several periodical
publications which attempt to explain and assess the
significance of economic and financial developments in the
country as also on the working of the Bank and provide a
wealth of factual data for the use of public.
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The RBI has followed the policy of controlled monetary
expansion. It means a balance between economic growth and
control over inflationary tendencies. Methods of credit control
used by the RBI can be divided into Quantitative Control
and Qualitative or Selective Control.
Quantitative Controls: The following methods are used:
(i) Bank Rate: It is the rate at which the RBI rediscounts
bill of exchange or other commercial papers. Simply put,
bank rate is the rate at which the RBI extends credit to
the commercial bank. Bank rate is also called discount
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rate.
(ii) Cash Reserve Ratio (CRR): The RBI Act, 1934, stipulates
that a commercial bank is required to keep in cash a
portion of its deposits with the RBI: this is known as
Cash Reserve Ratio.
(iii) Statutory Liquidity Ratio (SLR): The Statutory Liquidity
Ratio specifies that a commercial bank invest a designated
minimum proportion of its total assets in liquid assets,
such as cash, gold and unencumbered approved
securities (not government securities but having the
status of the same). This is in addition to the cash reserve
ratio. The SLR cannot be raised beyond 40%.
(iv) Open Market Operations: These involve the sale and
purchase of government securities by the RBI, the
rationale behind this operation being stabilisation of the
prices of government securities and, secondly,
controlling the inflationary pressure. Sales have always
been greater than the purchases.
(v) Selective Credit Control: The techniques of Selective
Credit Controls include minimum margins for lending
against specific securities, ceiling on the amount of credit
for specific purposes, discriminatory rates of interest
charged on certain types of advances. Through selective
credit control, the RBI tries to maintain sectoral and
regional balances.
(B) Qualitative Control: These instruments direct or
restrict the flow of credit to specified areas of economic
activity. Of course, some qualitative instruments may have
the shade of quantitative instruments as well. These are: I.
Margin Requirement, II. Rationing of Credit, III. Direct Action,
IV. Moral Suasion.
(i) Margin Requirement: The margin requirement of loan
refers to the difference between the current value of the
security offered for loans and the value of loans granted.
Suppose, a person mortgages an article worth Rs 100
with the bank and the bank give him loan of Rs 80. The
margin requirement in this case would be 20 percent. In
case, the flow of credit is to be restricted for certain
business activities in the economy, the margin
requirement of loans is raised for those very activities.
The commercial banks cannot exceed the quota limits
while granting loans.
(ii) Rationing of Credit: Rationing of credit refers to fixation
of credit quota for different business activities. Rationing
credit is introduced when the flow of credit is to be
checked particularly for speculative activities in the
economy. The central bank fixes credit quota for different
business activities. The commercial banks cannot exceed
the quota limits white granting loans.
(iii) Direct Action: The central bank may initiate direct action
against the member banks in case these do not comply
with its directives. Direct action includes derecognition
of a commercial bank as a member of the countrys
banking system.
(iv) Moral Suasion: Sometimes, the central bank makes the
member banks agree through persuation or pressure to
follow its directives on the flow of credit. The member
banks generally do not ignore the advice of the central
bank. The banks are advised to restrict the flow of credit
during inflation and be liberal in lending during deflation.
Note: Moral suasion is a combination of both presuasion
and pressure. The central bank tries to persuade the
commercial to follow its directive of monetary policy.
Otherwise, it can pressurise them to follow its policy
directives. If this also fails, the central bank can use
direct action which includes derecognition of a
commercial bank. As an instrument of monetary policy,
moral suasion works both as a quantitative instrument
as well as a qualitative instrument. However, often it is
classified as a qualitative instrument.
 Eco-Terms
Amortization: It is the provision for the repayment of
debt by means of accumulating a sinking fund through
regular payments which, with accumulated interest, may
be used to settle the debt in instalments over time, or in
a lump sum.
Authorised capital: It is the amount of share capital fixed
in the Memorandum of Association and the article of
association of a company as required by the Companies
Acts (Company Law). It is also known as nominal capital
or registered capital.
American Depository Receipt (ADR): ADR is a
certificate issued by an American company and
underwritten by a United States (US) bank that gives
details about the specific number of shares of an issuing
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company. The certificate is denominated in US Dollars
and can be traded at the US trade exchanges.
Asset Reconstruction Company (ARC): ARC is an entity
that takes over bad loans, known as Non Performing
Assets (NPAs) from banks and financial institutions,
creates a market for such assets and enables a clean up.
Bancor: It was an international currency proposed by
JM Keynes (the British economist) to be issued by an
international bank for use in the settlement of
international debts. His proposals were rejected at the
Bretton Woods Conference in 1944. However, the
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International Monetary Fund then established did
introduce Special Drawing Rights (SDRS) in 1970 which
were similar in concept.
Bill: It is a document which gives evidence of
indebtedness of one party to another. A bill may simply
be a written order for goods which can be used as security
for a loan to the supplier from a bank, or it may be a
security such as a Treasury Bill or Bill of Exchange.
Blue chip: It is a first-class equity share, the purchase of
which (the hope is) entails little risk even in economic
recessions (Depression). The term is, of course, applied
as a matter of subjective judgement.
Bond: It is a form of fixed-interest security issued by
central or local governments, companies, banks or other
institutions, e.g. National Savings Income Bonds. Bonds
are usually a form of long- term security but do not always
carry fixed interest and may be irredeemable and may be
secured or unsecured. Economists frequently make use
of the term bond in theoretical analysis, for example of
choices between holding cash and other financial assets,
in which a bond is a proxy for a whole range of securities.
Bull: He is a Stock Exchange speculator who purchases
stocks and shares in the belief that prices will rise and
that he will be able to sell them later at a profit. Bull is the
opposite of Bear. The market is said to be bullish when it
is generally anticipated that prices will rise.
Bullion: It means gold, silver, or other precious metal in
bulk, i.e. in the form of ingots or bars rather than in coin.
Gold bullion is used in international monetary
transactions between Central Banks and forms partial
backing for many currencies. A bullion market is a Gold
Market.
Bank Rate: It is the rate at which the RBI rediscounts
Bill of Exchange or other Commercial Papers. Simply put,
bank rate is the rate at which the RBI extends credit to
the commercial bank. Bank rate is also called Discount
Rate.
Balance of Payment: A statement that contains details
of all the economic transactions of a country with the
rest of the world, for a given time period, usually one
year. The statement has two parts: the Current Account
and the Capital Account.
The Current Account gives a record of a countrys
(a) Trade Balance, which shows the difference of exports
and imports of physical goods such as machinery,
textiles, chemicals and tea. (b) Invisibles, that comprise
services (rendered and received) such as transportation
and insurance and certain other flows, notably private
transfers by individuals. When imports of goods exceeds
exports, it is referred to as a Trade Deficit. However,
the overall current account position depends on both
the trade balance and the performance of Invisibles.
The Capital Account contains details of the inward
and outward flows of capital and international grants
and loans. Examples of such flows are external assistance,
foreign (direct and portfolio) investments, subscription
to Global Depository Receipts or Euro-convertible
Bonds and Deposits of non-residents. Inflows on the
capital account are helpful in financing a current account
Deficit. Any gap that remains is covered by drawing on
exchange of gold reserves, or by credit from the
International Monetary Fund.
Bancassurance: Bancassurance is an important channel
of distribution of insurance policies, wherein banks own
and sell the insurance products and bear the risk. In
India, however, through this channel, policies are sold
by bank staff at the bank counters, but are not owned by
the banks. This channel is jointly used by banks and the
insurance companies.
Basel II: Base II is a framework, formulated by the BIS
(the worlds central bank), that encapsulates the details
for adopting more risk-sensitive minimum capital
requirements for banking organisations worldwide.
 Bear: A Bear is an investor who reasons out the
downward movement of share prices thereby limits
oneself to trade of short-term nature. A stock market
operator who expects share prices to fall and keeps selling
(to pick up the shares later a lower price for actual
delivery), causing selling pressure and lowering the prices
further. Term derived from the attacking posture of the
bear, pushing downwards.
Blue Chip Companies: Shares of particularly well-known
and established companies which have been
consistently doing well in terms of profits, dividends
and growth over the years, have bright future prospects
and are expected to continue sustained growth in the
future. Used in the context of general equities. Large and
creditworthy company. Company renowned for the
quality and wide acceptance of its products or services
and for its ability to make money and pay dividends/
Gilt-edged security.
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Budget Deficit: The excess of government expenditure
over government income, which must be financed either
by borrowing or by printing money. Budget deficit is
measured by calculating the total expenditure over and
above the total receipts.
Budget Deficit = Total Receipts (Revenue + Capital)
-Total Expenditure (Revenue + Capital).
Revenue receipts: Receipts from tax, interest from
loans provided by the Government, dividends,
profits from Public Sector Undertakings (PSUs) and
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grants.
Capital receipts: Receipts from repayment of loans
by the State Governments, PSUs, sale of Government
assets.
Revenue expenditure: Salaries, interest payment,
subsidies, pension.
Capital Expenditure: Loan and advances to State
Governments and PSUs and capital outlay.
Capital: 1. It refers to assets which are capable of
generating income and which have themselves been
produced. Capital is one of the four Factors of Production,
and consists of the machines, plant and buildings that
made production possible, but excludes raw materials,
Land and Labour.
2. In more general usage, it refers to any asset or stock of
assets ( financial or physical) capable of generating
income.
Capital expenditure: It is the purchase of fixed assets
(e.g. plant and equipment), expenditure on Trade
Investments or acquisitions of other businesses and
expenditure on current assets (e.g. stocks).It differs from
Capital Formation.
Carry forward trading: It has evolved in response to
local needs in India and it refers to the trading in which
the settlement is postponed to the next account period
on payment of contango charges (vyaj badla) in which
the buyer pays interest on borrowed funds or the
backwardation charges (undha badla) in which the short
seller pays a charge for borrowing securities.
Certificate of deposit (CD): It is a negotiable claim issued
by a bank in return for a Term Deposit. CDs are securities
which are purchased for less than their face value, which
is the banks promise to repay the deposit and thus offer
a yield to maturity(YTM). The secondary market in CDs
is made up by the Discount Houses and the banks in the
Inter-Bank Market. Where a depositor knows that he
can, if necessary, sell his CD he will be willing to place
his funds with a bank for long periods.
Cheque: It is an order written by the drawer to a
Commercial Bank or Central Bank to pay on demand a
specified sum to a bearer, a named person or corporation.
Convertibility: A currency is said to be convertible when
it may be freely exchanged for another currency or gold.
Countervailing duty: It is a special additional import duty
imposed on a commodity to offset a reduction of its
price as a result of an export subsidy in the country of
origin.
Currency appreciation: It is the increase in the exchange
rate of one currency in terms of other currencies. The
term is usually applied to a currency with a floating rate
of exchange; upward changes in fixed rate of exchange
are called revaluations.
Currency depreciation: It is the fall in the exchange
rate of one currency in terms of other currencies.The
term is usually applied to floating exchange rates.
Downward changes in fixed rates of exchange are called
devaluations.
Current account: It is the most common type of bank
account, on which deposits do not earn interest, but can
be withdrawn by cheque at any time. The bank charges
according to the number of cheques cleared through the
account and the credit balance. If the average balance is
high, the customer may pay no bank charges.
Capital Adequacy Ratio: Arequirement imposed on banks
to have a certain amount of capital in relation to their assets,
i.e., loans and investment as a cushion against probable
losses in investment and loans. In simple terms, this means
that for every Rs 100 of risk-weighted assets, a bank must
have Rs X in the form of capital. Capital is classified into
Tier I or Tier II. Tier I comprises share capital and disclosed
reserves, whereas Tier II includes revaluation reserves,
hybrid capital and subordinated debt. Further, Tier II capital
should not exceed Tier I capital. The risk weightage depends
upon the type of assets. For example, it is zero on
government guaranteed assets, 20 per cent on short-term
bank claims and 100 per cent on private sector loans. The
capital adequacy ratio is the percentage of total capital
funds to the total risk-weighted assets.
 Clearing House: Clearing house is a place where local
bankers assemble and exchange cheques drawn on each
other. This saves time. Normally, it is conducted at RBI
or SBI or Lead Bank of area.
Cash Reserve Ratio (CRR): The RBI Act, 1934, stipulates
that a commercial bank is required to keep in cash a
portion of its deposits with the RBI. This is known as
Cash Reserve Ratio. The RBI can vary this ratio between
3 and 15 per cent. However, the RBI (amendment) Act,
2006 provides for removal of the floor and cilling with
respect to setting the CRR and authorizes the RBI to set
the ratio in keeping with the broad objective of
maintaining monetary stability in the economy.
Capital Market: Capital market deals with long term funds
which can be raised either through issue of securities or
by borrowing from certain institution e.g. Stock Exchange.
Capital market can be divided into two parts: one,
covering the market for corporate securities and the other,
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covering the market for gilt-edged securities (securities
issued by the Central govt, state govts and quasi-govt
bodies)
Capital market may also be divided into two segments:
(1) The Primary market and (2) The Secondary market.
New issues are made in the primary market. Outstanding
issues are traded (sold or bought) in the secondary
market.
Debenture: A debenture is an instrument in which the
issuer (company) undertakes the obligation to repay the
face value of the debenture to its holder at the end of a
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pre-determined period. Besides a fixed life span,
debenture carry a specified Coupon rate at which the
holder earns interest on it.
Deficit: It is an excess of liabilities over assets, or of an
expenditure flow over an income flow.
Deficit financing: It is a planned excess of expenditure
over income. Most governments now often spend more
than they raise in taxation, the difference being financed
by borrowing. The term is normally used in economics to
refer to a planned budget deficit incurred in the interests
of expanding aggregate demand by relaxing fiscal policy
and thus injecting purchasing power into the economy.
Dematerialisation (D-MAT): It is the process by which
shares in the physical/paper form are cancelled and credit
in the form of electronic balances is maintained on highly
secure systems at the depository.
Disinvestment: In term Disinvestment is simply selling
the equity(share) invested by the government in Public
Sector Enterprises (PSU). PSUs are enterprises which
are either owned completely by the government or whose
shares are maximum owned by the government(51% or
above).Examples include BHEL, ONGC etc. If there is no
progress achieved by the PSU or if there are no profits
obtained (sometimes government may not be able to
recover the investment capital also) by it, government
sells some part of the equity to private companies. The
funds raised by this sale can be used to develop other
under-performing PSUs.
Divestment: It is the liquidation or sale of parts of a firm.
Divestment is, in effect, the opposite of acquisition or
merger.
Dividend: It is the amount of a companys profits that
the board of directors decides to distribute to ordinary
shareholders. It is usually expressed either as a
percentage of the nominal value of the ordinary share
capital, or as an absolute amount per share.
Dumping: Strictly speaking, it means the sale of a
commodity on a foreign market at a price below marginal
cost. An exporting country may support the short-run
losses of this policy in order to eliminate competition
and thereby gain a monopoly in the foreign market.
Alternatively, it may dump in order to dispose of
temporary surpluses in order to avoid a reduction in
domestic prices.
Debt Service Ratio: The proportion of annual export
revenue (from goods and invisibles) of a country, which
constitutes its repayment obligations of the principal
and interest on external debt for the year.
Devaluation: The lowering of a countrys official
exchange rate in relation to a foreign currency (or to
gold), so that exports compete more favourably in the
overseas market. Devaluation is the opposite of
Revaluation.
Direct Tax and Indirect Tax: The primary purpose of
taxation is the mobilisation of resources and channelising
the same for productive investment. It can also be used
as a measure to promote equity and reduce disparities or
to encourage or discourage consumption of particular
items. Taxes are broadly divided into two: Direct Tax and
Indirect Tax. Direct Taxes are those taxes levied
immediately on the property and income of persons and
are paid directly by the consumers to the State. Income
Tax, Wealth Tax and Corporation Tax are examples of
Direct taxes. Indirect Taxes are those taxes that affect the
income and property of persons through their
consumption expenditures. Customs duties, Excise
duties, Sales Tax and Service Tax are examples of Indirect
taxes.
Equity: It is the residual value of a companys assets
after all outside liabilities (other than to shareholders)
have been allowed for. The equity in a company under
liquidation is the property of holders of ordinary shares,
hence these shares are popularly called equities.
Exchange rate: It is the price (rate) at which one currency
is exchanged for another currency, for gold, Special
Drawing Rights (SDRs)or European Currency units.
These transactions are carried out on spot or forward in
 the Foreign-Exchange markets. The actual rate at any
one time is determined by supply and demand conditions
for the relevant currencies in the market. These in turn
would depend on the balance of payments deficits or
surpluses of the relevant economies and the demand for
the currencies to meet obligations and expectations about
the future movements in the rate. If there were no
government control over the exchange market, there
would be an entirely free or floating exchange rate in
operation. With a freely floating system, no Gold and
Foreign Exchange Reserves would be required as the
exchange rate would adjust itself until the supply and
demand for the currencies were brought into balance.
Excise Duty: It refers to taxes levied upon goods
produced for home consumption.
Employees Stock Option Schemes (ESOS): As per SEBI
guidelines, ESOS is a voluntary scheme on the part of a
corporate to encourage employees participation in the
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company. A suitable percentage of reservation can be
made by the issue for the employees of their company or
the promoters of the company as the need may arise.
Reservation should not be more than 5% of the paid up
capital of the company in one year.
Employees Provident Fund (EPF): The Employees
Provident Fund (EPF) is a scheme, which provides to its
subscribers a lump sum retirement corpus, built out of
monthly contributions and the accumulated earnings.
The Employees Pension Scheme (EPS) provides a modest
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pension to the members of its scheme, while the Employes
Deposit Linked Insurance Scheme (EDLIS) offers
insurance cover to the member.
Finance Commission: The Finance Commission is a
body of five experts including a Chairman constituted
under Article 280 of the Constitution of India by the
President. The primary mandate of the Commission is to
recommend a formula for sharing the net proceeds of tax
revenues of the Centre with the states, the principles
which should govern the transfer of grants-in-aid of the
revenue of the states out of the Consolidated Fund of
India (CFI) and measures required to augment the
Consolidated Fund of individual States during a five-
year period. The first Finance Commission was
constituted in November 1951.
Fiscal Policy: It is a policy that is concerned with the
revenue and expenditure of the Government.
Fringe Benefit Tax: The fringe benefit tax is an additional
tax proposed in the Union Budget in 2005-06 order to
bring under the tax net fringe benefits received by the
employee from his employer. It is very important to note
the exact definition of fringe benefits because only those
item that get covered here would be included for the
purpose of taxation. It means any privilege, service,
facility or amenity, directly or indirectly provided by an
employer to his employees. It also includes such facilities
provided to former employees. Any reimbursement made
either directly or indirectly to the employer will also be
considered as a fringe benefit.
Fiscal deficit: The difference between revenue receipts
plus non-debt capital receipts on one side and total
expenditure including loans, net of repayment, on the
other side. In other words, this is the budget deficit plus
borrowings and other liabilities.
Giffen Goods: They are goods which do not obey the
laws of demand.
Gilt-edged securities: They are fixed-interest
Government Securities traded on the Stock Exchange.
They are called gilt-edged because it is certain that
interest will be paid and that they will be redeemed (where
appropriate) on the due date. Some gilt-edged securities
are not, of course, a risk-free investment, because of
fluctuations of their market value. Gilt-edged securities
do not include treasury bills.
Green Shoe Option: Green Shoe option is a right enabling
underwriters to buy or resell additional shares of the
issuing company if the market demand for the shares is
greater than originally expected. This method is named
after the green Shoe company that introduced this
concept. In India, the concept was used for the first time
in the Industrial Credit and Investment Corporation
(ICICI) Banks public offer in April 2004. This is also
called overallotment provision.
Hedge: It is the action taken by a buyer or seller to protect
his business or assets against a change in prices. A flour
miller who has a contract to supply flour at a fixed price
in two months time can hedge against the possibility of
a rise in the price of wheat in two months time by buying
the necessary wheat now and selling a two months future
in wheat for the same quantity. If the price of wheat
should fall, then the loss he will have sustained by buying
it now will be offset by the gain he can make by buying
in the wheat at the future price and supplying the future
contract at higher than this price, and vice-versa. In
practice, perfect hedging may not be possible because
spot and future prices will not balance one another out
after the event, but a significant reduction in risk in
normally possible. Hedging in this form is, in effect,
shifting risk on to specialised futures operators.
The purchase of equities, or other things for which
prices are expected to move at least in line with the general
price level, is often referred to as a hedge against inflation.
Issued capital: It is the part of a companys capital that
has been subscribed to by shareholders. It may or may
not be paid up.
Inflation: Inflation is a phenomenon when currency of a
country exceeds the production. Existence and
availability of surplus currency raises the general price
 level and lower the purchasing power of the currency.
So inflation results in depreciation in the value of money.
Money, which is a measure of value by change in itself
causes many hardships to the different classes. Inflation
benefits the businessmen, manufacturers, and debtors,
while it harms the persons of fixed income and the wage
earning class. Wages ever lag behind prices and so the
real purchasing power of money falls and creates
difficulties specially for the poor, lower middle and middle
classes. Effects of deflation are the reverse of inflation.
By a general fall in the price level businessmen suffers
and so do the debtors, while creditors, wage earners and
persons of fixed income gain. It can be safely concluded
that both inflation and deflation are bad. The best thing
is that value of money should remain stable over a period
of time.
Insider Trading: An insider is a person having access to
confidential information of a company such as expansion
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plans, contracts won, takeover bids, etc. Taking
advantage of such inside information, individuals such
as Executives or Consultants may make profit by buying
or selling shares. It is an illegal activity.
Letter of credit (LC): It is an order from a bank to a bank
abroad authorising payment to a person named in the
letter of a particular sum of money or up to a limit of a
certain sum. Letters of Credit are often required by
exporters who wish to have proof that they will be paid
before they ship goods, or who wish to minimise delay
in payment for the goods. Letters of credit, unlike Bills of
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Exchange, are not negotiable, but being cashable at a
known bank, are immediately acceptable to the seller in
the exporting country. A confirmed letter of credit is one
that has been recognised by the paying bank. Letters of
credit may be irredeemable or revocable, depending on
whether or not they can be cancelled at any time.
Listed Company: It is a company whose shares are listed
on the main market of the Stock Exchange.
Libor: An abbreviation for London Inter Bank Offered
Rate, which is an average of the interest rates at which
leading international banks are prepared to offer term
deposits to each other. The interest rate differs according
to the deposit maturity and the soundness of borrowing
banks. Libor is also used as a reference rate in quoting
interest rates on various other loans.
Most-favoured nation clause: It is the clause in an
international trade treaty under which the signatories
promise to extend to each other any favourable trading
terms offered in subsequent agreements to third parties.
Merchant Banking: Merchant banking stands for
providing various services relating to capital market and
finance to corporate sector. The merchant bankers also
provide consultancy to the corporate sector on the issues
like finance, capital structure and investment, mergers,
takeover and amalgamation, establishing coordination
between the govt and the corporate sector.
Monetary Policy: The monetary policy is issued by the
RBI to regulate the circulation of money in the economy.
By monetary policy RBI controls the supply of money
through different credit control instruments like bank
rate, CRR, SLR, etc. Every three month RBI review its
monetary and credit policy.
Money Market: Money markets are for borrowing and
lending money for one years or less. The securities in a
money market can be government bonds, treasury bills
and commercial paper from banks and companies. The
instruments of money market are Call Money, Commercial
Bills, Certificate of Deposit (CD), Commercial Paper (CP),
Treasury Bills (TB) etc.
Mobile Bank: Mobile bank is a bank on wheels offering
banking services to the villages situated on the route of
the mobile van on prescribed days. The specified timings
are notified in advance so that the villagers can make
use of the facilities on the prescribed date and time. The
bank either functions as an independent branch or can
also be attached to another branch as in the case of
extension counters.
Metro Banking: This service is offered by a foreign
bank under which a customer can operate his account
from any of its seven branches in the Bombay City, even
though the account is with one branch.
Mutual Fund: A Mutual Fund is a trust that pools the
savings of a number of investors who share a common
financial goal. The money thus collected is invested in
different types of securities. The income earned through
these investments and the capital appreciation realised
by the scheme, are shared by the unit holders in
proportion to the number of units held by them.
M-cap: M-cap, also known as market capitalisation, is
the total market value of outstanding shares. In other
words, market capitalisation = Number of shares market
price per share. Market capitalisation measures the
corporate/company size or worth.
MIBOR and MIBID: On 15th June 1998, the National
Stock Exchange (NSE) launched two new Reference Rates
for the loans of Inter-Bank Call Money Market. These
rates are Mumbai Inter-Bank Offered Rate (MIBOR)
and Mumbai Inter-Bank Bid Rate (MIBID). MIBOR will
be the indicator of lending rate for loans while MIBID
will be the lending rate for receipts.
Non-resident (ordinary) account: When Indian residents
go abroad for gainful employment their bank accounts
will be converted into non-resident ordinary accounts..
Other non-residents can also open such bank accounts.
The debits and credits are allowed as per rules. The
balance in this account is not eligible for automatic
repatriation abroad.
 Non-resident (External Rupee) account: Non-resident
Indians can open NRE account by remittance in the form
of foreign exchange from aborad or with foreign travellers
cheques, foreign currency, etc. Local credits are not
allowed. In respect of term deposits, NRE balance holders
are entitled to higher rate of interest as per RBI directives.
The balance in the account is eligible for repatriation
abroad without permission from RBI. These a/c holders
are also eligible for certain exemptions from IT/WT etc.
Non-resident accounts: Indian citizens who have gone
abroad for gainful employment and persons of Indian
origin residing abroad can open bank account in India
out of funds received from abroad or out of funds due to
them in India. Non-resident (ordinary), Non-resident
(external) rupee accounts are the type of non-resident
deposit accounts.
Narrow Banking: A Narrow Bank in its narrow sense,
may be defined as the one which places its funds only in
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short term, risk-free assets or alternatively it is one whose
demand deposits are matched by safe, liquid assets.
Narrow banking in it purest form, does not seem to exist
anywhere world over.
Non-Performing Assets (NPAs): Non-Performing Assets
emerge out of the credit facilities provided by a bank
that are not effectual in generating income. It is an overdue
for a period of 90 days (effective from March 2004) on
one account. It is a period within which interest or
instalment of principal amount is not paid back. NPAs,
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also known as bad loans, generally result out of sickness
in industrial and agricultural sectors, affect the profitability
of the financial structure. According to recent guidelines
by the RBI, banks are required to reduce their NPAs
level to 3 per cent, to be able to declare dividends.
Offshore Banking: Offshore banking means
international banking business involving non-resident
foreign currency denominated assets and liabilities.
These are the banking operations that cover only non-
residents and not domestic banking.
Paid-up capital: It is that part of the issued capital of a
company which has been paid up by the shareholders.
Par value: It is the price at which a share or other security
is issued, i.e. the face value of the investment. A share is
said to be standing above par if its quoted price on the
Stock Exchange is greater than that at which the share
was issued.
Poverty line: Poverty line is drawn on the basis of barest
minimum desirable nutritional standards of calorie intake.
In India poverty line has been drawn at an expenditure
level which is necessary for providing a person a minimum
nutrition of 2400 calories in rural areas and 2100 calories
in urban areas. In India, poverty line is drawn at per
capita monthly expenditure of Rs. 122 in urban and Rs.
107 in rural areas.
Preferential shares: Holders of preferential shares
precede the holders of ordinary shares, but follow
debenture holders, in the payment of dividends and in
the return of capital if the issuing company is liquidated.
Preferential shares normally entitle the holder only to a
fixed rate of dividend, but participating preferential shares
also entitle the holder to a share of residual profits.
Preference shares carry limited voting rights and they
may be redeemable or not. Cumulative preferential
shares carry forward the right to preferential dividends,
if unpaid, from one year to the next. From the investors
point of view, preferential shares lie between debentures
and ordinary shares in terms of risk and income, while to
the issuing company they permit some flexibility in
distribution policy at a lower cost than debentures.
Preferential shares now account for a very small
proportion of issues.
Premium: It is the difference, where positive, between
the current price or value of a security, or currency, and
its issue price or par value.
Prime Lending Rate: It is the rate of interest charged by
banks on working capital and short-term loans to their
most creditworthy borrowers. The prime lending rate
serves as a benchmark for deciding on the interest rate
to be charged to other borrowers. Accordingly, major
banks and also financial institutions periodically
announce their PLRs depending on their cost of funds
and competitive lending rates. From October 1997, the
Reserve Bank of India has decided to permit banks to
announce separate Prime Term Lending Rates on term
loans of three years and beyond. More recently, banks
have been given the freedom to have different PLRs for
different maturities.
Priority Sectors: Certain sectors of Indias economy
which have been identified for direct bank assistance
(from scheduled commercial banks including foreign
banks operating in India) at very favourable terms,
especially concessional lending rates. These sectors
include:
1. Agriculture
2. Smal-scale industry
3. Traders and small entrepreneurs
4. Self-employed persons and professionals
5. Transport operators
6. Students
Public Debt: These are loans taken by government to
meet its budgetary deficit. When it borrows from within
the country it is called internal public debt. When it
borrows from foreign countries, it is called external public
debt.
Purchasing Power Parity (PPP): Purchasing Power
Parity refers to the purchasing power of one currency in
its home economy at par with the other currencys
 purchasing power. Here, the exchange rate does not affect
the purchasing power. PPP is thus quality-specific, e.g. -
as per rupee-dollar exchange rate, $ 1 = say Rs 45. A
product priced at $ 1 in USA, might be available in India
for Rs 10 and not necessarily for Rs 45. Thus, as per the
PPP rate, Indias GDP value is almost 4 times higher than
if measured by the standard market rate of exchange.
Parity between two currencies at a rate of exchange that
will give each currency exactly the same purchasing
power in its own economy.
Repo: Repo is an agreement in which one party sells a
security to another party and agrees to repurchase it on
a specified date for a specified price.
Reverse Repo Rate: Reverse Repo Rate is an instrument
of borrowing funds for a short periods and involves
selling a security and simultaneously agreeing to
repurchase it at stated future date for a slightly higher
price.
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Real Time Gross Settlement System (RTGS): RTGS is a
gross settlement system in which both the processing
and final settlement take place continuously. It is the
centralised settlement system into which all the dispersed
net settlement systems flow. It enables the system to
effect settlement continuously in the central bank money.
Recession: It is a slowdown or fall in the rate of growth
of gross national product. A severe recession is called a
depression. Economic growth usually follows a cycle
from boom to recession and back again (known as the
business cycle). Recession is associated with falling
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levels of investment, rising unemployment and
sometimes, falling prices.
Revenue Deficit: Revenue deficit is the deficit emerging
out of excess of revenue expenditure over revenue
receipts. Revenue Deficit = Revenue receipts - Revenue
expenditure. Revenue receipts including grants, whereas
revenue expenditure is made towards interest payment,
subsidies, salaries, pension, etc.
Securities: It refers to income-yielding and other paper
traded on the Stock Exchange or in Secondary Markets.
It is usually a synonym for stocks and shares. An
essential characteristic of a security is that it is saleable.
The main types of security are:
(a) Fixed interest: Debentures, Preferential Shares,
Stocks and Bonds (including all government
securities and local authority securities);
(b) Variable interest: Ordinary Shares;
(c) Others: Bills or Exchange, Assurance policies,
Warrants. Securities may be Redeemable or
Irredeemable, quoted or unquoted.
Share: It is one of a number of equal portions in the
nominal capital of a company entitling the owner to a
proportion of distributed profits and of residual value if
the company goes into liquidation; a form of security.
Shares may be fully paid-up or partly paid, voting or
non-voting (sometimes called A shares).
Stock exchange: It is a market in which securities are
bought and sold. The economic importance of stock
exchanges is that they facilitate saving and investment,
first by making it possible for investors to dispose of
securities quickly if they wish to do so, and secondly in
channelling savings into productive investment.
However, they are declining in importance as a source of
new capital for industrial and commercial companies.
Ready marketability requires that new issues should be
made or backed by reputed borrowers or institutions,
that information should be available on existing
securities, and that there should be both a legal
framework and market rules to prevent fraud and sharp
practice. Stock exchanges have their own rules and
conventions, but their functioning depends also on the
existence of company and other law and financial
intermediaries, such as the Issuing Houses.
Subsidy: It refers to government grants to suppliers of
goods and services. A subsidy may be intended to keep
prices down (i.e. to raise real incomes of buyers), to
maintain incomes of producers (for example farmers) or
to maintain a service or employment . An essential
characteristic of a subsidy, as distinct from a Transfer
Payment, is that it has the object of keeping prices below
the factor cost of production. Subsidies, by distorting
market Prices and Costs, may lead to a misallocation of
resources although they may be justified in certain
circumstances (for example to correct for externalities)
and may be used instead of tariffs to protect new industry
where not banned by international agreements. It may
be possible to achieve the objectives of subsidies by
alternative means which have less distorting effects, for
example by direct income support through the taxation
system.
Stagflation: It is a typical sort of an inflation where the
expansion of currency is associated with static output
and employment or ever declining output and
employment. Such a situation is faced when the various
cost elements start risingspecially of the materials and
labour. It forces the entrepreneurs to raise the price to
uphold or to maintain their margin of profit. As they only
partially succeed in raising the prices of their products,
they are faced with a situation of declining output and
investment. Thus, on one side there is a rise in the general
price level and on the other side is a fall in the output and
employment.
Statutory Liquidity Ratio (SLR): The Statutory Liquidity
Ratio (SLR) specifies that a commercial bank invest a
designated minimum proportion of its total assets in
liquid assets, such as cash, gold and unencumbered
approved securities (not government securities but
 having the status of the same). This is in addition to the
Cash Reserve Ratio. The SLR cannot be raised beyond
40%.
Selective Credit Control: The techniques of selective
Credit Controls include minimum margins for lending
against specific securities, ceiling on the amount of credit
for specific purposes, discriminatory rates of interest
charged on certain types of advances. Through selective
credit control, the RBI tries to maintain sectoral and
regional balances.
Sensex: The Stock Exchange Sensitive Index (popularly
referred to as the SENSEX) reflects the weighted
arithmetic average of the price relative to a group of
shares included in the index of sensitive shares. For
example. Bombay Stock Exchange Sensitive Index is a
group of 30 sensitive shares.
Special Drawing Rights (SDRs): The Special Drawing
Right (SDR) is a form of international reserve assets,
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created by the IMF (in 1967), whose value is based on a
portfolio of widely used currencies.
Special Purpose Vehicle (SPV): The Special Purpose
Vehicle (SPV) is a tool for financial engineering, a means
to obtain a sound contracting. An SPV is a firm with legal
backing where every action of the firm is defined by pre-
specified contracts.
Subsidy: Subsidy is a payment in cash form made by the
government to suppliers or producers of goods and
services in order to enable them to sell their products at
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a lower level or at par with the value of their production.
Subsidies are also given in kind, viz fertilisers to farmers.
Treasury bills: They are instruments for short-term
borrowings by the government. The bills are issued by
tender to the money market and to government
departments through Tap Issues. Tenders are invited
every week from bankers, Discount Houses and Brokers.
On the one hand, treasury bills provide the government
with a highly flexible and relatively cheap means of
borrowing money to meet its fluctuating needs for cash.
On the other hand, the bills provide a sound security
for dealings in the money market, and the RBI, in
particular, can operate on that market by dealing in
treasury bills. The maximum terms of Treasury is 36
years.
Universal Banking: Universal banking means removal
of distinction between the activities which the financial
institution such as IDBI and banks undertake and
allowing financial institutions and banks to undertake
any activity of banking or development financing or
activity associated with that. The SH Khan Committee
had suggested the concept of Universal Banking.
Underwriting: The term underwriting means a person
agrees to take shares specified in the underwritten
agreement, if the public fails to subscribe for them.
Consideration is the commission payable to the
underwriters for the risks exposed. It is in the nature of
insurance against the possibility of inadequate
subscription of shares/debentures issued.
Value-added Tax (VAT): It is a general tax applied at each
point of exchange of goods or services from primary
production to final consumption. It is levied on the
difference between the sale price of the goods or services
(outputs) to which the tax is applied and the cost of
goods and services (inputs) bought in for use in its
production. The cost of these inputs is taken to include
all charges, including all taxes except VAT itself.
Wholesale banking: It means the making of loans or
acceptance of deposits on a large scale between banks
and other financial institutions, especially in the Inter-
Bank Market. It is thus distinct from retail banking, a
term for the business of the commercial banks carried
out with customers of their branches.
Wholly-Owned Subsidiary (WOS): A subsidiary whose
parent company owns virtually 100 per cent of its
common stock.
Wholesale Price Index (WPI): Wholesale Price Index is
the ratio of average current prices of goods in the
wholesale trade to the average base year price.
World Trade Organisation (WTO) Box:
Amber Box: It constitutes all forms of domestic
support deemed to be trade distorting, primarily by
encouraging excessive production. A market price
support mechanism that sets no production limit
will fall into the amber box.
Blue Box: Blue box subsidies are less trade
distorting because while they directly link
production to subsidies, they also set limit on
production, for instance, by way of quotas.
Green Box: Green box subsidies are generally
considered to be non-distorting in terms of
production and trade. Direct income support
unlinked to production, say for saving environment,
is a typical example of green box subsidies.
List of Various Committees and
their Focus Area
l Abhijit Sen Committee (2002): Long-Term Food Policy
l Abid Hussain Committee: Small-Scale Industries
l Athreya Committee: Restructuring of IDBI
l Basel Committee: Banking Supervision
l CB Bhave Committee: Company Information
l Chakravarty Committee: Working of the Monetary
System and Suggesting Measures for Improving the
Effectiveness of Monetary Policy in Promoting Economic
Development
l Chandra Shekhar Committee: Venture Capital
l Chandrate Committee: Delisting in Share Market
l Chore Committee: Review the Operation of the Cash
Credit System
l Dave Committee (2000): Pension Scheme for
Unorganised Sector
l Deepak Parikh Committee: Revival of Unit Trust of India
(UTI)
l Dhanuka Committee: Simplification of Transfer Rules in
Security Markets
l GV Ramakrishna Committee: Disinvestment
l Goiporia Committee: Improvement in the Customer
Service at Primary (Urban) Cooperative Banks
l Hanumant Rao Committee: Fertilizers
l JR Varma Committee: Current Account Carry Forward
Practice
l Jankiramanan Committee: Securities Transactions
l JJ Irani Committee: Company Law Reforms
l Kelkar Committee: Tax Structure Reforms
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l Khusro Committee: Agricultural Credit System
l Kumarmanglam Birla Report: Corporate Governance
l Mahajan Committee (1997): Sugar Industry
l Malegam Committee: Reforms in the Primary Market &
Repositioning of UTI
l Malhotra Committee: Broad Framework of Insurance
Sector
l Marathe Committee: Recommendation for Urban Co-
operative Banks
l Mckinsey Report:MergerofSevenAssociateBanks
with SBI
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l Meera Seth Committee:DevelopmentofHandlooms
l Narsimhan Committee:BankingReforms
l Parekh Committee:InfrastructureFinancing
l RV Gupta Committee:SmallSavings
l Raja Chelliah Committee:TaxReforms
l Rekhi Committee:IndirectTaxes
l RV Gupta Committee :AgriculturalCredit
l SP Talwar Committee:RestructuringofWeakPublic
Sector Banks
l S Tendulkar Committee:RedefiningPovertyLineand
its Calculation
l Shah Committee:ReformsRelatingtoNon-Banking
Financial Companies (NFBC)
l SL Kapoor Committee: Credit & Flow Problems of SSIs
l SN Verma Committee (1999): Restructuring the
Commercial Banks
l Tandon Committee: System of Working Capital Financing
by Banks
l Tarapore Committee: Report on Capital Account
Convertibility
l Udesh Kohli Committee: Analysing Fund Requirement
in Power Sector
l UK Sharma Committee: NABARDs Role in RRB
l Vaghul Committee: Money Market in India
Recent Working Groups and
Committees by RBI
l Working Group on Benchmark Prime Lending Rate
(BPLR): Deepak Mohanty
l High-Level Committee to Review Lead Bank Scheme:
Usha Thorat
l Working Group to Review the Business Correspondent
Model: P Vijaya Bhaskar Rao
l High-Level Group on Systems and Procedures for
Currency Distribution: Usha Thorat
l Committee on Financial Sector Assessment: Dr Rakesh
Mohan
l High-Level Committee on Estimation of Savings and
Investment: Dr C Rangarajan
l Committee on the Global Financial System (CGFS) on
Capital Flows and Emerging Market Economies:
Dr Rakesh Mohan
l Task Force For Diamond Sector: AK Bera
l Technical Advisory Group on Development of Housing
Start-Up Index in India: Prof Amitabh Kundu
l Working Group on Defraying Cost of ICT Solutions for
RRBs: G Padmanabhan
l Working Group on IT support for Urban Cooperative
Banks: R Gandhi
l Working Group on Technology Upgradation of Regional
Rural Banks: G Srinivasan
l Interest Rate Futures: Shri VK Sharma
l Internal Working Group to Study the Recommendations
of the NCEUS Report: KUB Rao
l Working Group on Improvement of Banking Services in
the Union Territory of Lakshadweep: S Ramaswamy
l Working Group on Rehabilitation of Sick SMEs: Dr KC
Chakrabarty
l Working Group on Improvement of Banking Services In
Jharkhand: VS Das
l Working Group on Improvement of Banking Services in
Himachal Pradesh: Dr J Sadakkadulla
l Internal Technical Group on Seasonal Movements in
Inflation: Dr Balvant Singh
l Working Group to Examine the Procedures and Processes
of Agricultural Loans: CP Swarankar
l Task Force on Empowering RRB Boards for Operational
Efficiency: Dr KG Karmakar
l Technical Group Set Up to Review Legislations on
Money Lending: SC Gupta
l Working Group to Suggest Measures to Assist
Distressed Farmers: SS Johl
l Technical Group on Statistics for International Trade in
Banking Services: KSR Rao
l Technical Advisory Group on Development of Leading
Economic Indicators for Indian Economy: Dr RB Barman
l Working Group on Savings for the Eleventh Five Year
Plan (2007-08 to 2011-12): Dr Rakesh Mohan
l Working Group on Compilation of State Government
Liabilities: Dr ND Jadhav
l Working Group on Improvement of Banking Services in
Uttaranchal: VS Das
l Working Group on Cost of NRI Remittances: PK Pain
l Working group to Formulate a Scheme for Ensuring
Reasonableness of Bank Charges: N Sadasivam
l Committee on Fuller Capital Account Convertibility:
SS Tarapore
l Committee on Financial Sector Plan for North Eastern
Region: Usha Thorat
l Survey on Impact of Trade Related Measures on
Transaction Costs of Exports: Balwant Singh
l Advisory Committee on Ways and Means Advances to
State Governments: MP Bezbaruah
l Need and Use Behavior for Small Denomination Coins:
K
Sanal Kumar Velayudhan
l Debt Sustainability at State Level in India: Indira
Rajaraman, Shashank Bhide and RPattnaik
l Internal Group to Examine Issues Relating to Rural Credit
and Microfinance: HR Khan
l Working Group to Review Export Credit: Anand Sinha
l Internal Working Group on RRBs: AV Sardesai
l Working Group on Warehouse Receipts and Commodity
Futures: Prashant Saran
l Internal Group to Review Guidelines on Credit Flow to
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SME Sector: CS Murthy
l Working Group on Regulatory Mechanism for Card:
R Gandhi
l Group on Model Fiscal Responsibility Legislation at State
Level: HR Khan
l Task Force on Revival of Cooperative Credit Institutions:
Prof A Vaidyanathan
l Special Group for Formulation of Debt Restructuring
Mechanism for Medium Enterprises: G Srinivasan
l Working Group on Screen Based Trading in Government
Securities: Dr RH Patil
l Expert Group on Internet Deployment of Central Database
Management System (CDBMS): Prof A Vaidyanathan
l Report on Monitoring of Financial Conglomerates:
Shyamala Gopinath
l Working Group on Development Financial Institutions:
N Sadasivan
l Advisory Committee to Advise on the Administered
Interest Rates and Rationalisation of Saving Instruments:
Dr Rakesh Mohan
l Advisory Committee on Flow of Credit to Agriculture:
Prof VS Vyas
l Working Group on Flow of Credit to SSI Sector: Dr AS
Ganguly
l Group to Study the Pension Liabilities of the State
Governments: BK Bhattacharya
l Rupee Interest Rate Derivatives: G Padmanabhan
l Working Group on Instruments of Sterilisation: Usha
Thorat
l Working Group on Information on State Government
Guaranteed Advances and Bonds: G Padmanabhan
l Working Group on Cheque Truncation and E-cheques:
Dr Barman, ED
l Working Group on Introduction of Credit Derivatives in
India: B Mahapatra
l Group to Assess the Fiscal Risk of State Government
Guarantees: Usha Thorat
l Advisory Committee on Ways and Means Advances to
State Governments: C Ramachandran
l Working Group on Rupee Derivatives: Jaspal Bindra
l Committee on Computer Audit: AL Narasimhan
l Committee on Payment Systems: Dr RH Patil
l Review Group on the Working of the Local Area Bank
Scheme: G Ramachandran
l Technical Group on Statistics of International Trade in
Services: Deepak Mohanty
l Working Group for Suggesting Operational and
Prudential Guidelines on STRIPS (Separately Traded
Registered Interest and Principal of Securities): MR
Ramesh
l Working Group on Electronic Money: Zarir J Cama
l Working Group on Economic Indicators: RB Barman
l Working Group to Examine the Role of Credit Information
Bureaus in Collection and Dissemination of Information
on Suit-filed Accounts and Defaulters: SR Iyer
l Information Systems Audit Policy for the Banking and
Financial Sector: RB Burman
l Working Group on Consolidated Accounting and Other
Quantitative Methods to Facilitate Consolidated
Supervision: Vipin Malik
l Expert Committee to Review the System of Administered
Interest Rates and Other Related Issues: YV Reddy
l Inter-Departmental Group to study the Rationalisation
of Current Account Facility with Reserve Bank of India:
KW Korgaonkar
l Expert Committee on Legal Aspects of Bank Frauds: Dr
NL Mitra
l Standing Committee on International Financial Standards
Codes: Dr YV Reddy
l Technical Group on Market Integrity: CR Muralidharan
l Technical Group on Phasing Out of Non-banks from Call/
Notice Money Market (March 2001): Dr YV Reddy
l Core Group on Voluntary Disclosure Norms for State
Governments: Dr YV Reddy
l Task Force to Study the Cooperative Credit System and
Suggest Measures for its Strengthening: Jagdish Kapoor
l Internal Group to Review the Guidelines Relating to
Commercial Paper: Dr YV Reddy
l High Power Committee on Urban Cooperative Banks:
MadhavRao
l Working Group for setting up Credit Information Bureau
in India: NH Siddiqui
l Committee for Redesigning of Financial Statements of
Non-Banking Financial Companies: VSN Murthy
l Working Group on Restructuring Weak Public Sector
Banks: MS Verma
l Working Group for Working Out Modalities on
Dissemination of Information in Electronic Form: YSP
Thorat and CR Gopalasundaram
l Committee on Technology Upgradation in the Banking
Sector: Dr A Vasudevan
l Working Group of Euro: V Subrahmanyam
l New Monetary Aggregates: Dr YV Reddy
l Committee on Capital Account Convertibility: SS
Tarapore
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Banks & Slogan
l ABN Amro Bank: Making more possible
l AIG: We know money
l Allahabad Bank: A tradition of trust
l Andhra Bank: For all your needs
l Bank of Baroda: Indias International Bank
l Bank of India: Relationships beyond banking
l Bank of Maharashtra: One family one bank
l Bank of Rajasthan: Dare to dream
l Canara Bank: Global bank with best practices
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l Central Bank: Central to you since 1911
l Citibank: The CITI never sleeps
l City Union Bank: Trust and Excellence since 1904
l Corporation Bank: Sarve Janah Sukhino Bhavantu
l Dena Bank: Trusted family bank
l Federal Bank: Your perfect banking partner
l ICICI Bank: Hum Hai Na (We are there to help you)
l Indusland Bank: One bank many solutions
l IDBI Bank: Not just for the big boys
l Indian Bank: Taking banking technology to the common
man
l J&K Bank: Serving to empower
l Karnataka Bank: Your family bank across India
l Karur Vysya Bank: Smart way to Bank
l Kotak Mahindra Bank: Think investment, think Kotak
l NAB: More give, less take
l Nainital Bank: Banking with personal touch
l Oriental Bank of Commerce: Where every individual is
committed
l Punjab National Bank: The name you can bank upon
l Reserve Bank of India: Indias central bank
l State Bank of India: The nation banks on us
l Syndicate Bank: Your faithful & friendly financial partner
l Tamilnad Mercantile Bank: Customer oriented and
committed to excellence
l UCO Bank: Honors your trust
l Vijaya Bank: A friend you can bank upon
l Yes Bank: Experience our expertise
l ABN Amro: Making more possible
l Bank of America: Think what we can do for you
l Bank of Scotland: With you all the way
l Barclays Bank: Now theres a thought
l Deutsche Bank: A passion to perform
l Goldman Sachs: Our clients interest always comes first
l HSBC Bank: The worlds local bank
l JP Morgan Chase: Chase what matters
l Lehman Brothers: Where vision gets built
l Morgon Stanley: World Wise
l Standard Chartered Bank: Leading the way in Asia, Africa
and the Middle East
l Standard Chartered Bank: You believe, we achieve
l Union Bank of Switzerland: You & Us
Key Banking and Financial Terms
Accrued interest: Interest due from issue date or from
the last coupon payment date to the settlement date.
Accrued interest on bonds must be added to their
purchase price.
Arbitrage: Buying a financial instrument in one market
in order to sell the same instrument at a higher price in
another market.
Ask Price: The lowest price at which a dealer is willing
to sell a given security.
Asset-Backed Securities (ABS): A type of security that
is backed by a pool of bank loans, leases, and other
assets. Most ABS are backed by auto loans and credit
cards these issues are very similar to mortgage-backed
securities.
At-the-money: The exercise price of a derivative that is
closest to the market price of the underlying instrument.
Basis Point: One hundredth of 1%. A measure normally
used in the statement of interest rate e.g., a change from
5.75% to 5.81% is a change of 6 basis points.
Bear Markets: Unfavorable markets associated with
falling prices and investor pessimism.
Bid-ask Spread: The difference between a dealers bid
and ask price.
Bid Price: The highest price offered by a dealer to
purchase a given security.
Blue Chips: Blue chips are unsurpassed in quality and
have a long and stable record of earnings and dividends.
They are issued by large and well-established firms that
have impeccable financial credentials.
Bond: Publicly traded long-term debt securities, issued
by corporations and governments, whereby the issuer
agrees to pay a fixed amount of interest over a specified
period of time and to repay a fixed amount of principal at
maturity.
 Book Value: The amount of stockholders equity in a
firm equals the amount of the firms assets minus the
firms liabilities and preferred stock.
Broker: Individuals licensed by stock exchanges to
enable investors to buy and sell securities.
Brokerage Fee: The commission charged by a broker.
Bull Markets: Favourable markets associated with rising
prices and investor optimism.
Call Option: The right to buy the underlying securities
at a specified exercise price on or before a specified
expiration date.
Callable Bonds: Bonds that give the issuer the right to
redeem the bonds before their stated maturity.
Capital Gain: The amount by which the proceeds from
the sale of a capital asset exceed its original purchase
price.
Capital Markets: The market in which long-term
securities such as stocks and bonds are bought and
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sold.
Certificate of Deposits (CDs): Savings instrument in
which funds must remain on deposit for a specified
period, and premature withdrawals incur interest
penalties.
Closed-end (Mutual) Fund: A fund with a fixed number
of shares issued, and all trading is done between
investors in the open market. The share prices are
determined by market prices instead of their net asset
value.
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Collateral: A specific asset pledged against possible
default on a bond. Mortgage bonds are backed by claims
on property. Collateral trusts bonds are backed by claims
on other securities. Equipment obligation bonds are
backed by claims on equipment.
Commercial Paper: Short-term and unsecured
promissory notes issued by corporations with very high
credit standings.
Common Stock: Equity investment representing
ownership in a corporation; each share represents a
fractional ownership interest in the firm.
Compound Interest: Interest paid not only on the initial
deposit but also on any interest accumulated from one
period to the next.
Contract Note: A note which must accompany every
security transaction which contains information such as
the dealers name (whether he is acting as principal or
agent) and the date of contract.
Controlling Shareholder: Any person who is, or group
of persons who together are, entitled to exercise or control
the exercise of a certain amount of shares in a company
at a level (which differs by jurisdiction) that triggers a
mandatory general offer, or more of the voting power at
general meetings of the issuer, or who is or are in a
position to control the composition of a majority of the
board of directors of the issuer.
Convertible Bond: A bond with an option, allowing the
bondholder to exchange the bond for a specified number
of shares of common stock in the firm. A conversion
price is the specified value of the shares for which the
bond may be exchanged. The conversion premium is the
excess of the bonds value over the conversion price.
Corporate Bond: Long-term debt issued by private
corporations.
Coupon: The feature on a bond that defines the amount
of annual interest income.
Coupon Frequency: The number of coupon payments
per year.
Coupon Rate: The annual rate of interest on the bonds
face value that a bonds issuer promises to pay the
bondholder. It is the bonds interest payment per dollar
of par value.
Covered Warrants: Derivative call warrants on shares
which have been separately deposited by the issuer so
that they are available for delivery upon exercise.
Credit Rating: An assessment of the likelihood of an
individual or business being able to meet its financial
obligations. Credit ratings are provided by credit agencies
or rating agencies to verify the financial strength of the
issuer for investors.
Currency Board: A monetary system in which the
monetary base is fully backed by foreign reserves. Any
changes in the size of the monetary base has to be fully
matched by corresponding changes in the foreign
reserves.
Current Yield: A return measure that indicates the
amount of current income a bond provides relative to its
market price. It is shown as: Coupon Rate divided by
Price multiplied by 100%.
Custody of Securities: Registration of securities in the
name of the person to whom a bank is accountable, or in
the name of the banks nominee; plus deposition of
securities in a designated account with the banks bankers
or with any other institution providing custodial services.
Default Risk: The possibility that a bond issuer will
default ie, fail to repay principal and interest in a timely
manner.
Derivative Call (Put) Warrants: Warrants issued by a
third party which grant the holder the right to buy (sell)
the shares of a listed company at a specified price.
Derivative Instrument: Financial instrument whose value
depends on the value of another asset.
Discount Bond: A bond selling below par, as interest in-
lieu to the bondholders.
Diversification: The inclusion of a number of different
investment vehicles in a portfolio in order to increase
returns or be exposed to less risk.
 Duration: A measure of bond price volatility, it captures
both price and reinvestment risks to indicate how a bond
will react to different interest rate environments.
Earnings: The total profits of a company after taxation
and interest.
Earnings per Share (EPS): The amount of annual
earnings available to common stockholders as stated on
a per share basis.
Earnings Yield: The ratio of earnings to price (E/P). The
reciprocal is price earnings ratio (P/E).
Equity: Ownership of the company in the form of shares
of common stock.
Equity Call Warrants: Warrants issued by a company
which give the holder the right to acquire new shares in
that company at a specified price and for a specified
period of time.
Ex-dividend (XD): A security which no longer carries the
right to the most recently declared dividend or the period
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of time between the announcement of the dividend and
the payment (usually two days before the record date).
For transactions during the ex-dividend period, the seller
will receive the dividend, not the buyer. Ex-dividend
status is usually indicated in newspapers with an (x)
next to the stocks or unit trusts name.
Face Value/ Nominal Value: The value of a financial
instrument as stated on the instrument. Interest is
calculated on face/nominal value.
Fixed-income Securities: Investment vehicles that offer
a fixed periodic return.
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Fixed Rate Bonds: Bonds bearing fixed interest payments
until maturity date.
Floating Rate Bonds: Bonds bearing interest payments
that are tied to current interest rates.
Fundamental Analysis: Research to predict stock value
that focuses on such determinants as earnings and
dividends prospects, expectations for future interest rates
and risk evaluation of the firm.
Future Value: The amount to which a current deposit
will grow over a period of time when it is placed in an
account paying compound interest.
Future Value of an Annuity: The amount to which a
stream of equal cash flows that occur in equal intervals
will grow over a period of time when it is placed in an
account paying compound interest.
Futures Contract: A commitment to deliver a certain
amount of some specified item at some specified date in
the future.
Hedge: A combination of two or more securities into a
single investment position for the purpose of reducing
or eliminating risk.
Income: The amount of money an individual receives in
a particular time period.
Index Fund: A mutual fund that holds shares in proportion
to their representation in a market index, such as the
S&P 500.
Initial Public Offering (IPO): An event where a company
sells its shares to the public for the first time. The
company can be referred to as an IPO for a period of time
after the event.
Inside Information: Non-public knowledge about a
company possessed by its officers, major owners, or
other individuals with privileged access to information.
Insider Trading: The illegal use of non-public information
about a company to make profitable securities
transactions
Intrinsic Value: The difference of the exercise price over
the market price of the underlying asset.
Investment: A vehicle for funds expected to increase its
value and/or generate positive returns.
Investment Adviser: A person who carries on a business
which provides investment advice with respect to
securities and is registered with the relevant regulator as
an investment adviser.
IPO price: The price of share set before being traded on
the stock exchange. Once the company has gone Initial
Public Offering, the stock price is determined by supply
and demand.
Junk Bond: High-risk securities that have received low
ratings (i.e. Standard & Poors BBB rating or below; or
Moodys BBB rating or below) and as such, produce
high yields, so long as they do not go into default.
Leverage Ratio: Financial ratios that measure the amount
of debt being used to support operations and the ability
of the firm to service its debt.
Libor: The London Interbank Offered Rate (or LIBOR) is
a daily reference rate based on the interest rates at which
banks offer to lend unsecured funds to other banks in
the London wholesale money market (or interbank
market). The LIBOR rate is published daily by the British
Bankers Association and will be slightly higher than the
London Interbank Bid Rate (LIBID), the rate at which
banks are prepared to accept deposits.
Limit Order: An order to buy (sell) securities which
specifies the highest (lowest) price at which the order is
to be transacted.
Limited Company: The passive investors in a
partnership, who supply most of the capital and have
liability limited to the amount of their capital
contributions.
Liquidity: The ability to convert an investment into cash
quickly and with little or no loss in value.
Listing: Quotation of the Initial Public Offering
companys shares on the stock exchange for public
trading.
Listing Date: The date on which Initial Public Offering
stocks are first traded on the stock exchange by the
 public
Margin Call: A notice to a client that it must provide
money to satisfy a minimum margin requirement set by
an Exchange or by a bank / broking firm.
Market Capitalisation: The product of the number of
the companys outstanding ordinary shares and the
market price of each share.
Market Maker: A dealer who maintains an inventory in
one or more stocks and undertakes to make continuous
two-sided quotes.
Market Order: An order to buy or an order to sell
securities which is to be executed at the prevailing market
price.
Money Market: Market in which short-term securities
are bought and sold.
Mutual Fund: A company that invests in and
professionally manages a diversified portfolio of
securities and sells shares of the portfolio to investors.
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Net Asset Value: The underlying value of a share of
stock in a particular mutual fund; also used with preferred
stock.
Offer for Sale: An offer to the public by, or on behalf of,
the holders of securities already in issue.
Offer for Subscription: The offer of new securities to
the public by the issuer or by someone on behalf of the
issuer.
Open-end (Mutual) Fund: There is no limit to the number
of shares the fund can issue. The fund issues new shares
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of stock and fills the purchase order with those new
shares. Investors buy their shares from, and sell them
back to, the mutual fund itself. The share prices are
determined by their net asset value.
Open Offer: An offer to current holders of securities to
subscribe for securities whether or not in proportion to
their existing holdings.
Option: A security that gives the holder the right to buy
or sell a certain amount of an underlying financial asset
at a specified price for a specified period of time.
Oversubscribed: When an Initial Public Offering has more
applications than actual shares available. Investors will
often apply for more shares than required in anticipation
of only receiving a fraction of the requested number.
Investors and underwriters will often look to see if an
IPO is oversubscribed as an indication of the publics
perception of the business potential of the IPO company.
Par Bond: A bond selling at par (i.e. at its face value).
Par Value: The face value of a security.
Perpetual Bonds: Bonds which have no maturity date.
Placing: Obtaining subscriptions for, or the sale of,
primary market, where the new securities of issuing
companies are initially sold.
Portfolio: A collection of investment vehicles assembled
to meet one or more investment goals.
Preference Shares: A corporate security that pays a
fixed dividend each period. It is senior to ordinary shares
but junior to bonds in its claims on corporate income
and assets in case of bankruptcy.
Premium (Warrants): The difference of the market price
of a warrant over its intrinsic value.
Premium Bond: Bond selling above par.
Present Value: The amount to which a future deposit
will discount back to present when it is depreciated in an
account paying compound interest.
Present Value of an Annuity: The amount to which a
stream of equal cash flows that occur in equal intervals
will discount back to present when it is depreciated in an
account paying compound interest.
Price/Earnings Ratio (P/E): The measure to determine
how the market is pricing the companys common stock.
The price/earnings (P/E) ratio relates the companys
earnings per share (EPS) to the market price of its stock.
Privatization: The sale of government-owned equity in
nationalized industry or other commercial enterprises to
private investors.
Prospectus: A detailed report published by the Initial
Public Offering company, which includes all terms and
conditions, application procedures, IPO prices etc, for
the IPO
Put Option: The right to sell the underlying securities at
a specified exercise price on of before a specified
expiration date.
Rate of Return: A percentage showing the amount of
investment gain or loss against the initial investment.
Real Interest Rate: The net interest rate over the inflation
rate. The growth rate of purchasing power derived from
an investment.
Redemption Value: The value of a bond when redeemed.
Reinvestment Value: The rate at which an investor
assumes interest payments made on a bond which can
be reinvested over the life of that security.
Relative Strength Index (RSI): A stocks price that
changes over a period of time relative to that of a market
index such as the Standard & Poors 500, usually
measured on a scale from 1 to 100, 1 being the worst and
100 being the best.
Repurchase Agreement: An arrangement in which a
security is sold and later bought back at an agreed price
and time.
Resistance Level: A price at which sellers consistently
outnumber buyers, preventing further price rises.
Return: Amount of investment gain or loss.
Rights Issue: An offer by way of rights to current holders
of securities that allows them to subscribe for securities
in proportion to their existing holdings.
Risk-Averse, Risk-Neutral, Risk-Taking:
Risk-averse describes an investor who requires greater
 return in exchange for greater risk. Risk-neutral describes
an investor who does not require greater return in
exchange for greater risk. Risk-taking describes an
investor who will accept a lower return in exchange for
greater risk.
Senior Bond: A bond that has priority over other bonds
in claiming assets and dividends.
Short Hedge: A transaction that protects the value of an
asset held by taking a short position in a futures contract.
Settlement: Conclusion of a securities transaction when
a customer pays a broker/dealer for securities purchased
or delivered, securities sold, and receives from the broker
the proceeds of a sale.
Short Position: Investors sell securities in the hope that
they will decrease in value and can be bought at a later
date for profit.
Short Selling: The sale of borrowed securities, their
eventual repurchase by the short seller at a lower price
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and their return to the lender.
Speculation: The process of buying investment vehicles
in which the future value and level of expected earnings
are highly uncertain.
Stock Splits: Wholesale changes in the number of shares.
For example, a two for one split doubles the number of
shares but does not change the share capital.
Subordinated Bond: An issue that ranks after secured
debt, debenture, and other bonds, and after some general
creditors in its claim on assets and earnings. Owners of
this kind of bond stand last in line among creditors, but
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before equity holders, when an issuer fails financially.
Substantial Shareholder: A person acquires an interest
in relevant share capital equal to, or exceeding, 10% of
the share capital.
Support Level: A price at which buyers consistently
outnumber sellers, preventing further price falls.
Technical Analysis: A method of evaluating securities
by relying on the assumption that market data, such as
charts of price, volume, and open interest, can help
predict future (usually short-term) market trends.
Contrasted with fundamental analysis which involves
the study of financial accounts and other information
about the company. (It is an attempt to predict
movements in security prices from their trading volume
history.)
Time Horizon: The duration of time an investment is
intended for.
Trading Rules: Stipulation of parameters for opening
and intra-day quotations, permissible spreads according
to the prices of securities available for trading and board
lot sizes for each security.
Trust Deed: A formal document that creates a trust. It
states the purpose and terms of the name of the trustees
and beneficiaries.
Underlying Security: The security subject to being
purchased or sold upon exercise of the option contract.
Valuation: Process by which an investor determines the
worth of a security using risk and return concept.
Warrant: An option for a longer period of time giving
the buyer the right to buy a number of shares of common
stock in company at a specified price for a specified
period of time.
Window Dressing: Financial adjustments made solely
for the purpose of accounting presentation, normally at
the time of auditing of company accounts.
Yield (Internal rate of Return): The compound annual
rate of return earned by an investment
Yield to Maturity: The rate of return yield by a bond held
to maturity when both compound interest payments and
the investors capital gain or loss on the security are
taken into account.
Zero Coupon Bond: A bond with no coupon that is sold
at a deep discount from par value.
International Organisations
International Monetary Fund (IMF)
l It was established on Dec. 7, 1945 in Washington on the
recommendation of Bretton Woods Conference.
l Started its operation on March 1, 1947.
Objectives:
1. To promote international monetary co-operation
2. To ensure balanced international trade.
3. To ensure exchange rate stability
4. To minimize or eliminate exchange restrictions by
promoting the system of multilateral payments.
5. To grant economic assistance to member countries for
eliminating the adverse imbalances in balance of payment.
6. To minimise imbalances in quantum and duration of
international trade.
7. IMF is controlled and managed by a BOARD OF
GOVERNORS.
8. Each member country nominates a Governor.
9. Each Governor is allotted a number of Votes, which is
determined by the quota allotted to respective country.
Quota is allotted according to contribution in the IMF
Capital.
10. Each Governor has got the right of 250 votes on the
basis of the membership and one additional vote for
each SDR 1,00,000 of quota.
11. That is the reason why the rich and industrialised
countries got the higher voting right due to their higher
quota, with the IMF.
12. The main source of IMF resources is the quota allotted
to member countries.
13. Till 1971, all the amounts of quotas and the assistance
 provided were denominated in US dollar, but since Dec
1971 all the quotas and transaction of IMF are expressed
in SDR (Special Drawing Right)
14. SDR is also known as paper Gold.
15. The IMFs financial year is from 1 May to 30 April.
16. The Finance minister is ex-offices Governor in IMF
Boards of Governors.
17. Indias, 11th place in IMF general quota.
World Bank (WB)
WB is not a single organisation, it is a group of
organisations, which include-
1. International Bank for Reconstruction and Development
(IBRD)
2. International Development Association (DA)
3. International Finance Corporation (IFC)
4. Multilateral Investment Guarantee Agency (MIGA)
5. International Centre for the Settlement of Investment
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Disputes (ICSID)
6. India is a member all organisations except ICSID.
7. IBRD is popularly known as World Bank.
8. WB was established in Dec. 1945 with IMF on the basis
of the recommendation of the Bretton Wood Conference.
9. IMF & WB are called Bretton Wood Twins.
10. WB started functioning in June 1946.
11. WB H.Q.: Washington DC
12. Total Members 186
13. WB and IMF are complementary organsation.
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14. WB provides long-term loans for promoting balanced
economic development.
15. IMF provides short term loans to its member countries
at the time of Balance of payment (BoP) crisis.
16. Generally every member country of the IMF automatically
becomes the member of WB. Similarly any country which
quits IMF is automatically expelled from the WBs
membership
Objectives of WB
1. To provide long-run capital to member countries for
economic reconstruction and development.
2. To increase the productivity of member countries and to
improve economic conditions and standard of living
among the countries.
3. To promote capital investment in member countries.
4. To provide guarantee for loans granted to small and large
units and other projects of member countries.
Capital Resources of WB
On June 30, 1996, the authorised capital of the WB was
$188 billion out of which $ 180.6 billions (96% of total
authorised capital) was issued to member countries in the
form of shares:
Member countries repay the share amount to the WB in
the following ways-
(i) 2% of alloted share are repaid in Gold, US $ or SDR.
(ii) 18% of its capital share ins its own currency.
(iii) The remaining 80% share in deposited by the member
country, only on demand by WB.
International Bank for Reconstruction
and Development (IBRD)
1. ESTD. Dec. 1945
2. Functioning - June 1946.
3. IBRD aims to reduce poverty in middle-income and
creditworthy poorer countries by promoting sustainable
development through loans. guarantees, risk
management products, and analytical and advisory
services.
4. IBRD is popularly known as world Bank.
International Development Association (IDA)
1. IDA is known as soft loan window of WB.
2. It was established on Sep. 24, 1960.
3. IDA provides long term interest free loans to its member
countries.
4. These loans are provided to the poor countries of the
world.
5. The resources of IDA include subscribed capital by
member countries, general replenishments by developed
countries, net income transferred by IBRD etc.
6. IDAs is administered by the same group which manages
the working of WB.
International Finance Corporation (IFC)
1. IFC was established in July 1956.
2. It provides loans to private industries of developing
nations without any Govt. guarantee.
3. It also promotes the additional capital investment in these
countryies.
Thus, the main work of IFC is to ensure the financial
support to private sector in developing countries.
4. It induces capitalist countries to invest in developing
countries.
World Trade Organisation (WTO)
1. On Oct 30, 1947, 23 countries at Geneva, signed an
agreement related to tariffs imposed on trade. This
agreement is known as General - Agreement on Tariffs
and Trade (GATT).
2. It came into force on Jan 1, 1948.
3. On Dec 12, 1995, GATT was abolished and replaced by
World Trade Organisation (WTO) which came into
existence on Jan. 1, 1995.
4. The Uruguay round of GATT gave birth to world Trade
Organisation.
5. WTOs headquarter is in Geneva.
6. WTO is not an agency of the UNO.
7. Total member of WTO 154.
8. WTO has a general Council for its administration, which
includes one permanent representative of each member
nation.
9. Generally, it has one meeting per month which is held at
Geneva.
10. The highest authority of policy making is WTOs
ministerial conference which is held after every 2 years.
11. There are a number of important committees for
administration of WTO, out of which, 2 committees May
the pivotal role in WTO. They are:
(a) Dispute settlement Body - DSB.
(b) Trade Policy Review Body TPRB
(c) DSB considers the complains of member countries
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against violation of rules by any member country. This
body appoints a group of experts to investigate into
such complaints. This body meets twice a month for
such cases.
12. TPRB reviews the trade policy of member countries. The
trade policy of all big trade powers of the World are
reviewed after every 2 years. All the members of WTO
are the members of TPRB.
13. Other important bodies of WTO are:
(a) Council for Trade in Goods.
(b) Council for Trade in services.
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(c) Council for Trade related aspects of intellectual
Property Rights.
WTO Ministerial Conferences
The highest decision making body of the WTO is the
Ministerial Conference, which has to meet at least every
two years. The Ministerial conference can take decisions
on all matters under any of the multilateral trade
agreements. Since the establishment of WTO in January
1995, so far seven Ministerial Conferences have been
held:
I. Singapore (9-13 December, 1996)
II. Geneva (18-20 May, 1998)
III. Seattle (USA) (November 30 December 3, 1999)
IV. Doha (Qatar) (9-14 November, 2001)
V. Cancun (Mexico) (10-14 September 2003.)
VI. Hong Kong (13-18 December, 2005)
VII. Geneva (July 2008)
Objectives of WTO
1. To improve standard of living of people if the member
countries.
2. To ensure full employment and broad increase in effective
demand.
3. To enlarge production and trade of goods.
The above three objective were also included in GATT,
but WTO also included some other objectives which are:
4. To enlarge production and trade of services.
5. To ensure optimum utilisation of world resources.
6. To accept the concept of sustainable development.
7. To protect environment.
Functions of WTO
1. To provide facilities for implemention, administration and
operation of multilateral and bilateral agreements of the
world trade.
2. To provide a platform to member countries to decide
future strategies related to trade and tariff.
3. To administer the rules and processes related to dispute
settlement.
4. To implement rules and provisions related to trade policy
review mechanism.
5. To assist IMF and IBRD for establishing coherence in
universal economic policy determination.
United Nations Conference on Trade and
Development (UNCTAD)
1. Established in 1964.
2. UNO had organised a conference on high economic
growth rate and income of the developing country on
March 31, 1964 in cairo. This conference was converted
into UNCTAD.
3. UNCTAD is a permanent organisation promoting
international trade.
4. Its headquarter is in Geneva.
5. It has session after every years. IMF has got the
permanent representation in all its bodies.
6. UNCTAD recommendations are only suggestions and
no country can be compelled to accept them.
7. Though UNCTAD is functioning as a permanent agency
of the UNO, but its membership is fully optional. Any
country may quit the UNCTAD.
Objectives of UNCTAD
1. To promote international trade especially with a view to
accelerate the economic development of underdeveloped
countries.
2. To determine policies and principles for international
trade and economic development.
3. To propose the strategy for implementing pre-approved
principles and policies.
4. To assist Economic and Social Council of the UNO.
5. To provide a suitable platform for trade dialogues.
Asian Development Bank (ADB)
1. ADB was established in Dec. 1966 on the
recommendations of Economic commission for Asia and
Far East (ECAFE).
2. The Bank Started its functioning on Jan 1, 1967. G-8
3. Head office of the bank is located at Manila (Philippines).
4. The chairmanship is always allotted to a Japanese. 1. Originally G-7 was an organisation of seven non-socialist
5. Three deputy chairman are appointed from US, Europe industralised countries of the World. It included US,
and Asia. Canada, Germany, Britain, France, Italy and Japan.
6. The Aim of this Bank is to accelerate economic and social 2. After Inclusion of Russia on June 21, 1997, it was renamed
development in Asia and Pacific region. as G-8.
7. Total members are 67 (67th is the Georgia). 3. First summit was held in Nov 1975 in Rambonilet near
8. ADB constituted Asian Development Fund in 1974, Paris (France).
Which provides loans to Asian countries on 4. Initially only 5 industrilised countries - US, UK, West
concessional interest rates. Germany, France and Japan were its member.
5. Later on, Canada and Italy also joined it in 1976.
South Asian Free Trade Area (SAFTA) 6. The member countries of G-8 accounts for 49% of global
exports, 51% of industrial output and 49% of assets in
SAFTA has come into force since Jan, 1, 2006 replacing the IMF.
South Asian Preferential Trade Agreement (SAPTA) which
was operating among the SAARC countries since Dec 7, G-5
1995.
l Group of Five developing Countries-members are:

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South Asian Association for Regional 1. India
Co-operation (SAARC) 2. China
3. Brazil
l Total Members are 8. 4. South Africa
1. India; 2. Pakistan; 3. Nepal; 4. Bangladesh; 5. Bhutan; 5. Mexico
6. Shri Lanka; 7. Maldives; 8. Afghanistan
l Established on December 7-8, 1985. G-20
l Headquarter - Kathmandu (Nepal) l Established by Finance ministers of G-8 in Sep. 1999 to
promote informal dialogue and cooperation among the
Association of South East Asian Nations members, within the framework of the Bretton Wood
(ASEAN)

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institutional system with a view to preserving
l Total Members are 10. international financial stability.
1. Indonesia l Members of the G-20 are: 1. Argentina, 2. Australia, 3.
2. Malaysia Brazil, 4. Canada, 5. China, 6. France, 7. Germany, 8. India,
3. Philippines 9. Italy, 10. Japan, 11. Indonesia, 12. Mexico, 13. Russia,
4. Singapore 14. Saudi Arbia, 15. South Africa, 16. South Korea, 17.
5. Thailand Turkey, 18. UK, 19. US, 20. Chair of European Union (EU)
6. Brunei G-15
7. Vietnam
1. G-15 is an organisation of 19 non-alligned developing
8. Laos
countries.
9. Myanmar
2. It was established in Sep. 1989 in Non- Alligned Summit
10. Cambodia;
(NAM) at Belgrade, Yugoslavia.
l Headquarter - Jakarta.
3. Members are: Mexico, Jamaica, Columbia, Venezuela,
l Observers: (1) India, (2) China, (3) Russia, (4) Japan, (5)
Peru, Brazil, Chile, Argentina, Senegal, Algeria, Nigeria,
South Korea
Zimbabwe, Egypt, Malaysia, India, Indonesia, Kenya and
ASEAN + 3 = Asean + Japan, China and Korea.
Sri Lanka.
Asean + 1 = Asean + India
4. The Secretariat of G-15 is in Geneva.
The objective of Asean is to promote economic co-
operation in South-East Asia and also to ensure G-24
economic stability in the region.
1. G-24 is the group of 24 developing countries which
l Asean to create Free Trade Area (FTA) by 2012.
initiates and demands more benefits for developing
countries in the meeting of WB, IMF and UNCTAD.
2. India is also a member of G-24.
 G-77
1. This group was established under UNO in 1964.
2. It is an international economic community of developing
countries aiming at protecting economic interest of the
member countries.
3. It includes 130 members belonging to Third World: Asia,
Africa and Latin America.
BRICS
1. B- Brazil, R- Russia, I India, C- China, S - South Africa
2. The first ever summit was held in Russian town
Yekaterinburg in June 16, 2009.
Asia Pacific Economic Co-operation (APEC)
1. APEC was founded in Nov. 1986.
2. It was institutionalised in June 1992. after meeting in
Bangkok.
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3. Secretariat is in Singapore.
4. Former Austratian PM Bob Hawk played important role
in the formation.
5. Present Membership is 21.
6. Members are: Australia, America, Canada, Mexico, Japan,
China, Hongkong, Taiwan, South Korea, Indonesia,
Bruenei, Philiphines, Singapore, Malaysia, Thailand,
Papua New Guinea, New Zealand, Chile, Russia, Vietnam
and Peru.
North America Free Trade Agreement
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(NAFTA)
1. The NAFTA was signed in 1994. It is a free trade area
among the US, Canada and Mexico.
2. It was constituted to meet the challenges from European
Union (EU) and Japan.
3. It was formed on the basis of Rule of the origin, which
implied that the economic resources of the countries in
the political region should be utilised for economic
development of people belonging to that country only.
Amnesty International (AI)
AI is a worldwide human-rights organisation, was
founded by a British lawyer, Peter Benson, in 1961. Its
secretariat is at London. The AI aims at the release of prisoners
of conscience and also opposes torture and death penalty.
Asian Clearing Union (ACU)
ACU was established in 1975 with a view to provide the
clearing facilities ( to eliminate the difficulty of payments for
trade in local currencies so as to solve the scarcity problem
of foreign exchange) in current international transactions
among Asian countries. India, Pakistan, Bangladesh, Nepal,
Sri Lanka, Iran and Burma are its members. The headquarters
of ACU is in Tehran.
Asia Europe Meeting (ASEM)
25 nations of Asia and Europe, including 15 countries
from EU, 7 from ASEAN and Japan, South Korea and China,
formed an international joint organisation known as ASEM.
ASEM is an economic coalition of Asian and European
countries.
Asia Pacific Economic Co-operation (APEC)
APEC was founded in 1989 to devise programmes of co-
operation between member nations. Member countries are
making all efforts to develop APEC as free trade zone like EEC
and NAFTA. The present membership of APEC is 21.
BENELUX
It is a commercial union of Belgium, Netherlands and
Luxemberg which was constituted in 1958 for promoting
mutual commercial cooperation among these three-member
countries. Its headquarters is in Brussels.
European Economic Community ( EEC) or
European Common Market (ECM)
Six European countries known as Inner Six (France,
Belgium, Netherlands, Luxemberg, W. Germany and Italy)
constituted EEC on the basis of Rome Treaty (1957). The aim
of EEC was to ensure complete free trade among member
countries. At present the total membership of EEC is now 25.
The EU, now worlds biggest trading entity, has a population
of 455 million. Its share would be 18-25% of global GDP. Its
Headquarters is at Brussels.
Food and Agriculture Organisation (FAO)
FAO, as an associate institution of the UNO, was
established in 1945 at Quebec. The functions of FAO are to
bridge the gap between the demand for and supply of
agriculture products in the world by making a regular supply
of food products. Its HQ is at Rome.
Greenpeace (GP)
GP is an international environmental organisation
founded in Canada in 1971. It works to highlight and change
govt. and industrial policies and actions that threaten the
environment or the natural world. It opposes whaling, spread
of nuclear weapons, off-shore oil drilling, dumping of
radioactive wastes into oceans arid the threat to wildlife from
hunting, pollution and habitat loss.
Indian Ocean Rim Association for
Regional Co-operation (IOR-ARC)
The formal establishment of IORARC was declared in
1997 at Port Louis of Mauritius for promoting economic co-
operation among the countries in coastal regions of Indian
Ocean. This association will work as a bridge between 3
continentsAsia, Africa and Australia.
International Air Transport Association(IATA)
IATA is an organisation of the scheduled international
airlines in the world. The IATA facilitates cooperation in inter-
airline affairs and promotes safe, secure, reliable, regular and
economical air services to benefit the people of the world.
International Committee of the Red Cross
(ICRC)
The ICRC came into being in 1864 by the work of Jean-
Henri Dunant, a Swiss humanitarian, who organised
emergency aid for the wounded soldiers of Austria and France
in the Battle of Solferino in 1859. The ICRC acts to help all
victims of war and internal violence, attempting to ensure
implementation of humanitarian rules restricting armed
violence. Its HQ is at Geneva.
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International Labour Organisation (ILO)
ILO is one of the UN functional organisation based in
Geneva whose central task is to look into problems of world
manpower supply, its training, utilisation, domestic and
international distribution, etc.
International Organisation for Standardisation
(ISO)
The ISO is a non-governmental federation of national
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standards bodies established in 1947 in Geneva. The aims of
the ISO are to promote the development of standardisation
and related activities in the world with a view to facilitating
the international exchange of goods and services; and
develop cooperation in the spheres of intellectual, scientific,
technological and economic activities.
Latin American Free Trade Association
(LAFTA)
LAFTA is an economic federation of 11 Latin American
States formed in 1960 and within all commodities are trade
free of tariff. The primary purpose of LAFTA is to encourage
trade creation in the economically integrated area; its current
membership includes Brazil, Argentina, Chile and Venezuela.
Mercosur
It is a new common market developed among four South
American CountriesBrazil, Argentina, Paraguay and
Uruguay. It is a trade block of Latin America. Since 1995,
these four countries have abolished all restrictions on mutual
trade.
Organisation for Economic Cooperation and
Development (OECD)
OECD is an organisation of 20 countries from the Western
World including all of those in Europe and North America. Its
major objectives is to assist the economic growth of its
member nations by promoting co-operation and technical
analysis of national and international economic trends.
Organisation of Petroleum Exporting Countries
(OPEC)
OPEC is an organisation consisting of the 13 major oil
exporting countries of the Developing that acts as a cartel
to promote their joint national interests. Members include
Saudi Arabia, Nigeria, Algeria, Venezuela, Libya, Kuwait, UAE,
Iran, Iraq, Ecuador, Qatar, Gabon and Indonesia.
Universal Postal Union (UPU)
The UPU originated as the General Postal Union after a
treaty for its establishment was signed at the Postal Congress
of Berne in 1874 and came into force in 1875. The UPU became
a specialised agency of the UN in 1948. The HQ is at Berne,
and has 189 members. The aim of the UPU is to organise and
improve world postal services and promote the development
of international postal collaboration.
Worldwide Fund for Nature (WWF)
The WWF was formed and registered as a charity in
1961. The aim of the WWF are to preserve genetic species
and ecosystem diversity; ensure that the use of renewable
natural resources is sustainable; promote actions to reduce
to a minimum pollution and the wasteful exploitation and
consumption of resources and energy; etc. Its HQ is in
Switzerland.
 International Organisations and Headquarters
Name Headquarters
International Monetary Fund (IMF) Washington DC (USA)
World Bank) Washington DC (USA)
International Bank for Reconstruction and Development (IBRD) Washington DC (USA)
General Agreement on Tariffs and Trade (GATT) Geneva (Switzerland)
World Trade Organisation (WTO) Geneva (Switzerland)
United Nations Conference on Trade and Development (UNCTAD) Geneva (Switzerland)
Asian Development Bank Manila (Philippines)
South Asian Association for Regional Cooperation (SAARC) Kathmandu (Nepal)
Association of South East Asian Nations (ASEAN) Jakarta (Indonesia)
Organisations of the Petroleum Exporting Countries (OPEC) Vienna (Austria)
Benelux Brussels (Belgium)
European Economic Community (EEC) or European Common Market (ECM) Brussels (Belgium)
Food and Agriculture Organisation (FAO) Rome (Italy)
The United Nations Educational Scientific and Cultural Organisation (UNESCO) Paris (France)
International Labour Organiastion (ILO) Geneva (Switzerland)

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Interpol Lyons (France)
UNICEF New York (USA)
United Nations Human Rights Commission (UNHRC) Geneva (Switzerland)

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