{GK-GS} Economy: Economic terms and definitions

Cash reserve Ratio (CRR): It is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks comes down. The RBI uses the CRR to drain out excessive money from the system. Commercial banks are required to maintain with the RBI an average cash balance, the amount of which shall not be less than 3% of the total of the Net Demand and Time Liabilities (NDTL), on a fortnightly basis and the RBI is empowered to increase the rate of CRR to such higher rate not exceeding 20% of the NDTL.
SLR Rate: SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit. SLR is determined as the percentage of total demand and percentage of time liabilities. Time Liabilities are the liabilities a commercial bank liable to pay to the customers on their anytime demand. SLR is used to control inflation and propel growth. Through SLR rate tuning the money supply in the system can be controlled efficiently
Repo rate: The rate at which the RBI lends money to commercial banks is called repo rate. It is an instrument of monetary policy. Whenever banks have any shortage of funds they can borrow from the RBI. A reduction in the repo rate helps banks get money at a cheaper rate and vice versa. The repo rate in India is similar to the discount rate in the US.
Reverse Repo rate: It is the rate at which the RBI borrows money from commercial banks. Banks are always happy to lend money to the RBI since their money are in safe hands with a good interest. An increase in reverse repo rate can prompt banks to park more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out of the banking system.
What is Bank Rate? Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply.
What is PLR? The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime rate are made by banks at the same time; although, the prime rate does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments of the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of each respective month. Some banks use the name "Reference Rate" or "Base Lending Rate" to refer to their Prime Lending Rate.
What is Deposit Rate? Interest Rates paid by a depository institution on the cash on deposit.
What is Inflation? Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. Inflation happens when there are fewer Goods and more buyers; this will result in increase in the price of Goods, since there is more demand and less supply of the goods.
What is Deflation? Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period.
What is FII? FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII's generally buy in large volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance Companies, Banks, etc.
What is FDI? FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in a Indian Company.
What is IPO? IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock exchanges.
What is Disinvestment? The Selling of the government stake in public sector undertakings.
What is Fiscal Deficit? It is the difference between the government’s total receipts (excluding borrowings) and total expenditure.
What is Revenue deficit? It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received by the government.
What is GDP? The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period; classically a year.
What is GNP? Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market.
What is National Income? National Income is the money value of all goods and services produced in a country during the year.
What is Per Capita Income? The national income of a country, or region, divided by its population. Per capita income is often used to measure a country's standard of living.
What is Vote on Account? A vote-on account is basically a statement, where the government presents an estimate of a sum required to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place, to keep the machinery running.
Difference between Vote on Account and Interim Budget? Vote-on-account deals only with the expenditure side of the government's budget, an interim Budget is a complete set of accounts, including both expenditure and receipts.
What is SDR? The SDR (Special Drawing Rights) is an artificial currency created by the IMF in 1969. SDRs are allocated to member countries and can be fully converted into international currencies so they serve as a supplement to the official foreign reserves of member countries. Its value is based on a basket of key international currencies (U.S. dollar, euro, yen and pound sterling).
What is SEZ? SEZ means Special Economic Zone is the one of the part of government’s policies in India. A special Economic zone is a geographical region that economic laws which are more liberal than the usual economic laws in the country. The basic motto behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of the people.
What is an Open Market operation (OMO)? The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system by RBI. Open market operations are the principal tools of monetary policy.
What is Liquidity Adjustment Facility (LAF)? A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets.
What is NEFT System? National Electronic Fund Transfer (NEFT) is an online system for transferring funds of Indian financial institution (especially banks). This facility is used mainly to transfer funds below Rs. 1,00,000.
What is RTGS System? The acronym 'RTGS' stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction. The Reserve Bank of India has instructed banks that they should not use RTGS for amounts below Rs 1 lakh.
What is the difference between RTGS and NEFT? The key difference between RTGS and NEFT is that while RTGS is on gross settlement basis, NEFT is on net settlement basis. The minimum transaction value for RTGS is Rs. 1,00,000, whereas there is no minimum value for NEFT.
What is Bancassurance? It is the term used to describe the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products.
What is Wholesale Price Index (WPI)? The Wholesale Price Index (WPI) is the index used to measure the changes in the average price level of goods traded in wholesale market. A total of 435 commodity prices make up the index. It is available on a weekly basis. It is generally taken as an indicator of the inflation rate in the Indian economy. The Indian Wholesale Price Index (WPI) was first published in 1902, and was used by policy makers until it was replaced by the Producer Price Index (PPI) in 1978.
What is Consumer price Index (CPI)? It is a measure estimating the average price of consumer goods and services purchased by households.
What is Venture Capital? Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a loan, and the investor hopes the investment will yield a better-than-average return.
What is a Treasury Bills? Treasury Bills (T-Bills) are short term, Rupee denominated obligations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are thus useful in managing short-term liquidity. At present, the Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments.
What is Banking Ombudsmen Scheme? The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. The Banking Ombudsman Scheme was first introduced in India in 1995, and was revised in 2002. The current scheme became operative from the 1 January 2006, and replaced and superseded the banking Ombudsman Scheme 2002.
What is Subsidy? A subsidy is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or to encourage it to hire more labor.
What is a Debenture? How many types of debentures are there? What are they? A debenture is basically an unsecured loan to a corporation. A type of debt instrument that is not secured by physical asset. Debentures are backed only by the general creditworthiness and reputation of the issuer. There types: [1.] Convertible Debentures: Any type of debenture that can be converted into some other security or it can be converted into stock; [2.] Non-Convertibility Debentures(NCB): Non-Convertible Debentures are those that cannot be converted into equity shares of the issuing company, as opposed to Convertible debentures. Non-convertible debentures normally earn a higher interest rate than convertible debentures do.
What is a hedge fund? ‘Hedge’ means to reduce financial risk. A hedge fund is an investment fund open to a limited range of investors and requires a very large initial minimum investment. It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment.
What is FCCB? A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued in a currency different than the issuer’s domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A company may issue an FCCB if it intends to make a large investment in a country using that foreign currency.
What is Capital Account Convertibility (CAC)? It is the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. This means that capital account convertibility allows anyone to freely move from local currency into foreign currency and back. The Reserve Bank of India has appointed a committee to set out the framework for fuller Capital Account Convertibility. Capital account convertibility is considered to be one of the major features of a developed economy. It helps attract foreign investment as it makes it easier for domestic companies to tap foreign markets.
What is Current Account Convertibility? It defines at one can import and export goods or receive or make payments for services rendered. However, investments and borrowings are restricted.
What is Arbitrage? The opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.
What is Capitalism? Capitalism as an economy is based on a democratic political ideology and produces a free market economy, where businesses are privately owned and operated for profit; in capitalism, all of the capital investments and decisions about production, distribution, and the prices of goods, services, and labor, are determined in the free market and affected by the forces of supply and demand.
What is Socialism? Socialism as an economy is based on a collectivist type of political ideology and involves the running of businesses to benefit the common good of a vast majority of people rather than of a small upper class segment of society.
What is corporate governance? The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. It’s defined as the general set of customs, regulations, habits, and laws that determine to what end a firm should be run.
What is E-Governance? E-Governance is the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable, transparent and effective.
What is Right to information Act? The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State Governments. The Act applies to all States and Union Territories of India, except the State of Jammu and Kashmir - which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October 2005.
Credit Rating Agencies in India? The credit rating agencies in India mainly include ICRA (Investment Information and Credit Rating Agency of India Limited) and CRISIL (Credit Rating Information Services of India Limited). Their main function is to grade the different sector and companies in terms of performance and offer solutions for up-gradation.
What is NASSCOM ? The National Association of Software and Services Companies (NASSCOM) is a consortium that serves as an interface to the Indian software industry and Indian BPO industry. Maintaining close interaction with the Government of India in formulating National IT policies with specific focus on IT software and services maintaining a state of the art information database of IT software and services related activities for use of both the software developers as well as interested companies overseas. Key Person: Natarajan Chandrasekaran, Chairman and Som Mittal, President
What is ASSOCHAM? The Associated Chambers of Commerce and Industry of India (ASSOCHAM), India's premier apex chamber covers a membership of over 2 lakh companies and professionals across the country. It was established in 1920 by promoter chambers, representing all regions of India. As an apex industry body, ASSOCHAM represents the interests of industry and trade, interfaces with Government on policy issues and interacts with counterpart international organizations to promote bilateral economic issues. Key Person: Rajkumar Dhoot, President
What is SENSEX and NIFTY? SENSEX is the short term for the words "Sensitive Index" and is associated with the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE, whereas NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL SHOW DAILY TRADING MARKS. Sensex and Nifty both are an "index”. An index is basically an indicator it indicates whether most of the stocks have gone up or most of the stocks have gone down.
What is SEBI? SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by U.K.Sinha.
What are Mutual funds? Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.
What is Asset Management Companies? A company that invests its clients' pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.
What is Foreign Exchange Reserve? Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve positions.
What is RBI? The Reserve Bank of India is the central bank of India, was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years. RBI acts as a banker to the Government and Banks. The Central Bank maintains record of Government revenue and expenditure under various heads. It maintains deposit accounts of all other banks and advances money to other banks, when needed. Another important function of the Central Bank is the issuance of currency notes, regulating their circulation in the country by different methods.
Functions of RBI? [1.] Banker to the Government: performs merchant banking function for the central and the state governments, also acts as their banker; [2.] Banker to banks: maintains banking accounts of all scheduled banks; [3.] Monitoring and Governing function: regulate all the scheduled banks, and maintain and frame countries Monetary policy.
What is monetary policy? A Monetary policy is the process by which the government, central bank, of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy. It’s the mandate of RBI to frame and maintain MP.
What is Fiscal Policy? Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine public revenue and public expenditure.
What is Core Banking Solutions (CBS)? Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. It will cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions.
What are banks and their features? A bank is financial organizations where people deposit their money to keep it safe. Banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner. Banks Features: [1.] Traditional banking: It is the normal bank accounts we have. Like, put your money in the bank and they act as a security and you will get only the normal interests (decided by RBI in our case, FED bank in US); [2.] Retail Banking: Banking services for an individual customer is known as retail banking; [3.] Merchant banks: A bank that deals mostly in but international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public; [4.] Online banking (or Internet banking): It allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank; [5.] Mobile Banking: It’s a service that allows you to do banking transactions on your mobile phone without making a call, using the SMS facility. It’s a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone; [6.] Investment banking: It is entirely different. Here, people who are having so much money (money in excess which will yield only less interest if in Banks) will invest their money and get higher returns. For example, if I have more money instead of taking the pain of investing in share market, buying properties etc. I will give to investment banks and they will do the money management and give me higher returns when compared to traditional banks.
What is Scheduled Bank? All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are scheduled banks. These banks comprise Scheduled Commercial Banks and Scheduled Cooperative Banks. All most all banks are Scheduled banks in India.
What are Commercial Banks? Commercial banks may be defined as, any banking organization that deals with the deposits and loans of business organizations. Commercial banks issue bank checks and drafts, as well as accept money on term deposits. Commercial banks also act as moneylenders, by way of installment loans and overdrafts. Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals.
Types of Loans offered by Commercial banks: 1) Secured Loan: A secured loan is one where the borrower provides a certain property or asset as collateral against the loan. The main condition of these loans is that if the loan remains unpaid, the bank has the right to use the property in any way they like to realize the outstanding amount. 2) Unsecured Loan: Unsecured loans have no collateral and therefore command higher interest rates. There are a variety of unsecured loans available today and these include credit cards, credit facilities such as a lines of credit, corporate bonds, and bank overdrafts. 3) Mortgage Loans: Mortgage loans that are provided by commercial banks are similar to secured loans but are used specifically to buy real estate property for commercial purposes. In most of these cases, the banks hold a lien on the title to the particular property purchased with the loan. If the borrower is unable to pay the loan back, the bank leverages this item against the loan to generate funds or recover the principal.
What are Public Sector Banks? These are banks where majority stake is held by the Government of India. Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.
What are Private Sector Banks? These are banks majority of share capital of the bank is held by private individuals. These banks are registered as companies with limited liability. Examples of private sector banks are: ICICI Bank, Axis bank, HDFC, etc.
What are Foreign Banks? These banks are registered and have their headquarters in a foreign country but operate their branches in our country. Examples of foreign banks in India are: HSBC, Citibank, Standard Chartered Bank, etc.
What are Regional Rural Banks? Regional Rural Banks were established under the provisions of an Ordinance promulgated on the 26th September 1975 and the RRB Act, 1976. The RRBs mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans. The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State. RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27 scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is shared by the owners in the proportion of 50%, 15% and 35% respectively. Prathama bank is the first Regional Rural Bank in India located in the city Moradabad in Uttar Pradesh.
What are Cooperative Banks? A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts, etc). They provide limited banking products and are specialists in agriculture-related products. Cooperative banks are the primary financiers of agricultural activities, some small-scale industries and self-employed workers. Co-operative banks function on the basis of "no-profit no-loss". Anyonya Co-operative Bank Limited (ACBL) is the first co-operative bank in India located in the city of Vadodara in Gujarat.
What is NABARD? NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.
What is SIDBI? The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro, small and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. Mr. Sushil Muhnot is the chairman of SIDBI since April 4, 2012.
What is a NBFC? A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. NBFCs are doing functions akin to that of banks; however there are a few differences: (i) A NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand -- immediately or within a very short period -- like your current or savings accounts.); (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and (iii) Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.
What is Micro Credit? It is a term used to extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families.
What is Micro Finance? Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and micro insurance. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks.
How Bank gets Money? Banks make money by lending your money out at interest and by charging you for services provided. Bank charge for every service, whether it is for an electronic transaction, or permitting a transfer through the Internet banking system. When banks get profits they invest in other companies and in return they will get money.
What is Cheque? Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the maker/depositor's name with that Bank. A bill of exchange drawn on a specified banker and payable on demand. It is the “written order directing a bank to pay money”.
What is demand Draft? A demand draft is an instrument used for effecting transfer of money. It is also a Negotiable Instrument. It is a banker's check. A check may be dishonored for lack of funds a DD cannot. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than individuals as it is 100% trustable.
Diff. between Banking & Finance? Finance is generally related to all types of financial, this could be accounting, insurances and policies. Whereas banking is everything that happens in a bank only. The term Banking and Finance are two very different terms but are often associated together. These two terms are often used to denote services that a bank and other financial institutions provide to its customers.
What are Non-Performing Assets? Non-performing assets, also called non-performing loans, are loans, made by a bank or finance company, on which repayments or interest payments are not being made on time. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.
What is Recession? A true economic recession can only be confirmed if GDP growth is negative for a period of two or more consecutive quarters.
What is Retail Banking? Banking services for individual customers. Retail banking refers to banking in which banking institutions execute transactions directly with consumers. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth.
What is Private Banking? Banking services offered to high net-worth individuals. Private banking institution assists the high net-worth individual in investing his/her money in exchange for commissions and fees. The term "private" refers to the customer service being rendered on a more personal basis.
What is an Investment Bank and Commercial Bank and what is the difference between them? Investment Bank: A financial institution that deals primarily with raising capital, corporate mergers and acquisitions, and securities trades. It aids companies in acquiring funds. Commercial Bank: An institution which accepts deposits, makes business loans, and offers related services. Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals. A Commercial bank is commonly referred to as simply a bank. The term ‘Commercial’ is used to distinguish it from an investment bank. The term ‘Commercial’ is used to refer to any banking organization or division that deals with the deposits and loans of business organizations. Traditionally, banks either engaged in commercial banking or investment banking. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals. Through investment banking, an institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company. Examples of Investment Banks: Bank of America, J P Morgan Chase, Citigroup.
What is Private Equity? Private equity is money invested in companies that are not publicly traded on a stock exchange. Instead, they normally seek equity stakes (that is partial ownership) in private companies. Venture capital is a specialized subcategory of private equity. Both are high risk, high reward investment approaches.
What is Globalization? Globalization is a process of interaction and integration among the people, companies, and governments of different nations. Advantages of Globalization: i)It can reduce Poverty, ii) It promotes world peace, iii)It is allowing access to technology in developing countries and etc.
What is Privatization? Privatization can also be called denationalization or disinvestment. Privatization refers to the transfer of ownership from the government (public sector) to the private business sector either partially or totally.
What is Liberalization? The process of reducing or removing restrictions on international trade. This may include the reduction or removal of tariffs, abolition or enlargement of import quotas, abolition of multiple exchange rates, and removal of requirements for administrative permits for imports or allocations.
What is Marketization? It is an economic system based on the principles of the market, including supply, demand, choice and competition.
What is Free Market economy? A market economy based on supply and demand with little or no government control is said to be free market economy.
What is Stock Market/ Share market? A market where securities are bought and sold. Its basic function is to enable public ltd. companies, governments and local authorities to raise capital by selling securities to investors.
What is Equity? Ownership interest in a corporation in the form of stock.
What is Stock? The capital raised by a corporation through the issue of shares entitling holders to an ownership interest (equity).
What is IRDA? To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Headquartered in Hyderabad. Hari Narayan is the chairman of IRDA.
What is Balance of Payments? A balance of payments is a strategy used to analyze the relationship between money that is flowing into a country and money that is going out of that same country. The BOP is divided into three main categories: the current account, the capital account and the financial account.
What is Balance of Trade? The difference between a country's imports and its exports.
What is Savings Account? A savings account typically refers to an account in which one places money to earn a small amount of interest.
What is Debit Card? A debit card is a plastic card issued by banks to customers. The card allows instant purchase, removing the correct balance from the user’s attached bank account.
What is Credit Card? A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale.
What is Viral Marketing? Marketing by the word of the mouth, having a high pass-rate from person to person is called Viral marketing. Creating a 'buzz' in the industry is an example of viral marketing.
What is Bench Marketing? A comparison of the business processes with competitors and improving prevailing ones is called bench marketing.
What is Drip Marketing? The method of sending promotional items to clients is called Drip marketing.
What is Guerilla Marketing? Unconventional marketing intended to get maximum results from minimal resources is nothing but Guerilla Marketing.
What is Social Media Marketing? Social media marketing is marketing using online communities, social networks, blog marketing and more.
What is Direct Marketing? Direct Marketing is a form of advertising that directly reaches to the customers on a personal basis (like phone calls, private mailings, etc) rather than traditional channel of advertising (like TV, Newspapers, etc).
What is Internet Marketing? Internet marketing is the marketing of products or services over the Internet. Internet Marketing is also known as i-marketing, web-marketing, online-marketing, Search Engine Marketing (SEM) or e-Marketing.
What is Digital Marketing? Digital Marketing is the practice of promoting products and services using all forms of digital advertising. It includes Television, Radio, Internet, mobile and any other form of digital media.
Marketing Mix: The Marketing Mix model (also known as the 4 P's) can be used by marketers as a tool to assist in defining the marketing strategy. The idea was that if you could identify the right combination of these elements, your marketing would succeed. E. Jerome McCarthy introduced the 4 P's of Marketing as a way to describe the mix of factors required to successfully market a product. The 4 P’s are: Product, Price, Promotion and Place (distribution). The 7 P’s of marketing consists of: 4 P’s + People, Process and Physical evidence. The first 4 P's are considered the basis of any marketing process. The last 3 P's are a recent addition to the entire marketing process.
What is SWOT Analysis? SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.
What is Customer Relationship Management (CRM)? Customer Relationship Management concerns the relationship between the organization and its customers. It is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them.
What are the Three Levels of a Product? Core Product, Actual Product and Augmented Product
What is Market Research? Market research is any organized effort to gather information about markets or customers. Market research is for discovering what people want, need, or believe. It can also involve discovering how they act. Once that research is completed, it can be used to determine how to market your product.
What is Market Information? To know the prices of the different commodities in the market, as well as the supply and demand situation.
What is Market Segmentation? The division of a market into different homogeneous groups of consumers is known as market segmentation. The purpose for segmenting a market is to allow your marketing program to focus on the subset of prospects that are "most likely" to purchase your offering. If done properly this will help to insure the highest return for your marketing expenditures.
What is Branding? The essence of a product, its quality and competitiveness displayed in the form of letters, symbols and colours is known as branding.
What is Marketing? The process of planning and executing the concepts, pricing, promotion and distribution of ideas/goods/services to satisfy individuals or organizational goals is called marketing.
What is Overdraft? It is the loan facility on customer current account at a bank permitting him to overdraw up to a certain agreed limit for an agreed period. Interest is payable only on the amount of loan taken up.