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1) International capital flows are the financial side of INTERNATIONAL TRADE.

When someone imports a good or service, the buyer (the importer) gives the seller
(the exporter) a monetary payment, just as in domestic transactions. If total exports
were equal to total imports, these monetary transactions would balance at net zero:
people in the country would receive as much in financial flows as they paid out in
financial flows. But generally the trade balance is not zero. The most general
description of a countrys balance of trade, covering its trade in goods and services,
income receipts, and transfers, is called its current account balance. If the country
has a surplus or deficit on its current account, there is an offsetting net financial
flow consisting of currency, securities, or other real property ownership claims.
This net financial flow is called its capital account balance.
2) The concept of international liquidity is associated with international payments.
These payments arise out of international trade in goods and services and also in
connection with capital movements between one country and another. International
liquidity refers to the generally accepted official means of settling imbalances in
international payments.
In other words, the term 'international liquidity' embraces all those assets which are
internationally acceptable without loss of value in discharge of debts (on external
In its simplest form, international liquidity comprises of all reserves that are
available to the monetary authorities of different countries for meeting their
international disbursement. In short, the term 'international liquidity' connotes the
world supply of reserves of gold and currencies which are freely usable
internationally, such as dollars and sterling, plus facilities for borrowing these.
Thus, international liquidity comprises two elements, viz., owned reserves and
borrowing facilities.
Under the present international monetary order, among the member countries of
the IMF, the chief components of international liquidity structure are taken to be:
1. Gold reserves with the national monetary authorities - central banks and with the
2. Dollar reserves of countries other than the U.S.A.
3. -Sterling reserves of countries other than U.K.

3) Bank rate, also referred to as the discount rate in American English,
is the
rate of interest which a central bank charges on the loans and advances to a
commercial bank.
Whenever a bank has a shortage of funds, they can typically borrow from the
central bank based on the monetary policy of the country.
The borrowing is commonly done via repos, where the repo rate is the rate at
which the central bank lends short-term money to the banks against securities. A
reduction in the repo rate will help banks to get money at a cheaper rate. When the
repo rate increases, borrowing from the central bank becomes more expensive. It is
more applicable when there is a liquidity crunch in the market.
The reverse repo rate is the rate at which banks can park surplus funds with reserve
bank, while the repo rate is the rate at which the banks borrow from the central
bank. It is mostly done when there is surplus liquidity in the market.
4) Currency deposited by national governments or corporations in banks outside
their home market. This applies to any currency and to banks in any country. For
example, South Korean won deposited at a bank in South Africa, is considered

Also known as "euromoney."
5) A clearing house is a financial institution that provides clearing and settlement
services for financial and commodities derivatives and securities transactions.
These transactions may be executed on a futures exchange or securities exchange,
as well as off-exchange in the over-the-counter (OTC) market. A clearing house
stands between two clearing firms (also known as member firms or clearing
participants) and its purpose is to reduce the risk of one (or more) clearing firm
failing to honor its trade settlement obligations. A clearing house reduces the
settlement risks by netting offsetting transactions between multiple counterparties,
by requiring collateral deposits (also called "margin deposits"), by providing
independent valuation of trades and collateral, by monitoring the credit worthiness
of the clearing firms, and in many cases, by providing a guarantee fund that can be
used to cover losses that exceed a defaulting clearing firm's collateral on deposit.
Once a trade has been executed by two counterparties either on an exchange, or in
the OTC markets, the trade can be handed over to a clearing house, which then
steps between the two original traders' clearing firms and assumes the legal
counterparty risk for the trade. This process of transferring the trade title to the
clearing house is called novation. It can take fractions of seconds in highly liquid
futures markets; or days, or even weeks in some OTC markets.
6) The foreign exchange market (forex, FX, or currency market) is a global
decentralized market for the trading of currencies. The main participants in this
market are the larger international banks. Financial centers around the world
function as anchors of trading between a wide range of multiple types of buyers
and sellers around the clock, with the exception of weekends. The foreign
exchange market determines the relative values of different currencies.

The foreign exchange market works through financial institutions, and it operates
on several levels. Behind the scenes banks turn to a smaller number of financial
firms known as dealers, who are actively involved in large quantities of foreign
exchange trading. Most foreign exchange dealers are banks, so this behind-the-
scenes market is sometimes called the interbank market, although a few
insurance companies and other kinds of financial firms are involved. Trades
between foreign exchange dealers can be very large, involving hundreds of
millions of dollars.
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Because of the sovereignty issue when involving
two currencies, Forex has little (if any) supervisory entity regulating its actions.
The foreign exchange market assists international trade and investments by
enabling currency conversion. For example, it permits a business in the United
States to import goods from the European Union member states, especially
Eurozone members, and pay euros, even though its income is in United States
dollars. It also supports direct speculation and evaluation relative to the value of
currencies, and the carry trade, speculation based on the interest rate differential
between two currencies.

7) The Reserve Bank of India (RBI) is India's central banking institution, which
controls the monetary policy of the Indian rupee. It was established on 1 April
1935 during the British Raj in accordance with the provisions of the Reserve Bank
of India Act, 1934.
The share capital was divided into shares of 100 each fully
paid, which were initially owned entirely by private shareholders.
India's independence in 1947, the RBI was nationalised in the year 1949.
The RBI plays an important part in the development strategy of the Government of
India. It is a member bank of the Asian Clearing Union. The general
superintendence and direction of the RBI is entrusted with the 21-member Central
Board of Directors: the Governor (currently Dr. Raghuram Rajan), four Deputy
Governors, two Finance Ministry representative, ten government-nominated
directors to represent important elements from India's economy, and four directors
to represent local boards headquartered at Mumbai, Kolkata, Chennai and New
Delhi. Each of these local boards consists of five members who represent regional
interests, as well as the interests of co-operative and indigenous banks.
The bank is also active in promoting financial inclusion policy and is a leading
member of the Alliance for Financial Inclusion
8) The World Bank is a United Nations international financial institution that
provides loans
to developing countries for capital programs. The World Bank is a
component of the World Bank Group, and a member of the United Nations
Development Group.
The World Bank's official goal is the reduction of poverty. According to its
Articles of Agreement, all its decisions must be guided by a commitment to the
promotion of foreign investment and international trade and to the facilitation of
capital investment
The World Bank was created at the 1944 Bretton Woods Conference, along with
three other institutions, including the International Monetary Fund (IMF). The
World Bank and the IMF are both based in Washington, D.C., and work closely
with each other.
Although many countries were represented at the Bretton Woods Conference, the
United States and United Kingdom were the most powerful in attendance and
dominated the negotiations.

An asset that can
be converted
into cash quickly
and with
minimal impact
to the price
received. Liquid
assets are
regarded in the
same light as
cash because
their prices are
relatively stable
when they are
sold on the open
Investopedia explains 'Liquid Asset'

For an asset to be liquid it needs an established market with
enough participants to absorb the selling without materially
impacting the price of the asset. There also needs to be a
relative ease in the transfer of ownership and the movement of
the asset. Liquid assets include most stocks, money market
instruments and government bonds. The foreign exchange
market is deemed to be the most liquid market in the world
because trillions of dollars exchange hands each day, making it
impossible for any one individual to influence the exchange
10) Engaging in banking activities such as accepting deposits or making loans at
facilities away from a bank's home office. Branch banking has gone through
significant changes since the 1980s in response to a more competitive nationwide
financial services market. Financial innovation such as internet banking will
greatly influence the future of branch banking by potentially reducing the need to
maintain extensive branch networks to service consumers. The Riegle-Neal
Interstate Banking & Branching Efficiency Act of 1994 authorized well-capitalized
banks to acquire branch offices, or open new ones, anywhere in the United States
outside their home states after June 1, 1997. Most states passed laws enabling
interstate branching prior to that date. Branch banking networks are gradually
evolving into multistate financial services networks where depositors can access
their accounts from any banking office.
11) Conceptually a form of bank governance that occurs when a small group of
people control at least three banks that are independently chartered. Usually, the
controlling parties are majority shareholders or the heads of interlocking
directorates. Chain banking as an entity has declined with the surge in interstate
Chain banking is not like branch banking, where one bank has several different
locations. It also differs from group banking, which has several affiliate banks
within a single bank holding company. The liberalization of banking laws has also
contributed to the obsolescence of this type of bank control.
Chain banking is a situation in which three or more banks that are independently
chartered are controlled by a small group of people. The mechanisms used to
establish this type of arrangement normally involve securing enough stock between
the individuals to have a controlling interest in each of the bank corporations
involved. The arrangement can also be managed with the establishment of
interlocking directorates or boards of directors that effectively create a network
between the banks without the need for some type of central holding company.
The concept of chain banking is different from group banking, in that the entities
involved in the chain bank arrangement remain autonomous and are not owned by
a single holding company. By contrast, the group banking model requires a holding
company to own all the banks involved, effectively creating an umbrella under
which all the banks operate. Chain banking is also different from branch banking, a
situation where all local branches of a bank are owned by a single banking
12) The Industrial Development Bank of India (IDBI) was established in 1964
under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of
India. In 1976, the ownership of IDBI was transferred to the Government of India
and it was made the principal financial institution for coordinating the activities of
institutions engaged in financing, promoting and developing industry in India.
IDBI provided financial assistance, both in rupee and foreign currencies, for green-
field projects as also for expansion, modernisation and diversification purposes. In
the wake of financial sector reforms unveiled by the government since 1992, IDBI
also provided indirect financial assistance by way of refinancing of loans extended
by State-level financial institutions and banks and by way of rediscounting of bills
of exchange arising out of sale of indigenous machinery on deferred payment
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After the public issue of IDBI in July 1995, the Government shareholding in the
Bank came down from 100% to 75%.
IDBI played a pioneering role, particularly in the pre-reform era (196491), in
catalyzing broad based industrial development in India in keeping with its
Government-ordained development banking charter.
[citation needed]

Some of the institutions built with the support of IDBI are the Securities and
Exchange Board of India (SEBI), National Stock Exchange of India (NSE), the
National Securities Depository Limited (NSDL), the Stock Holding Corporation of
India Limited (SHCIL), the Credit Analysis & Research Ltd, the Exim Bank
(India), the Small Industries Development Bank of India (SIDBI) and the
Entrepreneurship Development Institute of India.