SOME FINANCE AND BANKING ACRONYMS & TERMINOLOGIES

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

 Absorption
It is a term related to real estate, it is a process of renting a real estate property
which is newly built or recently approved.

 Account Payee Cheque

When two parallel lines along with a crossed made on the cheque and the
word ‗ACCOUNT PAYEE‘ written between these lines, then that types of
cheques are called account payee cheque. The payment of the account payee
cheque taken place on the person, firm or company on which name the cheque
issue.

 Accrued Interest
It is the 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.

 Accumulated Benefit Obligation (ABO)

Accumulated Benefit Obligation is a measure of liability of pension plan of an
organisation and is calculated when the pension plan is terminated.

 Adjustable Rate Mortgage (ARM)

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

 Adjusted Net Bank Credit (ANBC)

It is net bank credit added to investments made by banks in non-SLR bonds.

 AEPS
AEPS stands for Aadhar Enabled Payment System
 It is a payment system which uses Aadhar card number and an
individual‘s online UIDAI authentication, which are linked to a
customer‘s Bank account.
 A customer will have to register his/her Aadhar number to their
existing bank account, provided their bank is AEPS enabled.
 Through AEPS, customer can withdraw or deposit cash, make balance
enquiry, and transfer funds.
 The maximum amount of transaction per account per day is ₹50,000.
 These transactions are normally conducted by Business
Correspondents (BCs) service centres.

 Amortization
Adjusting expenses for intangible assets over a long span of time is
amortization.
 Annual Percentage Rate (APR)
APR is a percentage that is calculated on the basis of the amount financed, the
finance charges, and the term of the loan.

 Ante-dated Cheque
If a cheque bears a date earlier than the date on which it is presented to the
bank, it is called as "antedated cheque". Such a cheque is valid upto three
months from the date of the cheque.

 Arbitrage
Arbitrage is buying a financial instrument in one market in order to sell the
same instrument at a higher price in another market.

 Ask Price
It is the lowest price at which a dealer is willing to sell a given security.

 Asset Backed Securities (ABS)

It is a type of security that is backed by a pool of bank loans, leases, and other
assets. Most ABSs are backed by auto loans and credit cards – these issues are
very similar to mortgage backed securities.

 Asset Finance Company (AFC)

An AFC is a company which is a financial institution carrying on as its
principal business the financing of physical assets supporting
productive/economic activity, such as automobiles, tractors, lathe machines,
generator sets, earth moving and material handling equipment, moving on
own power and general purpose industrial machines.

 Association of Mutual Funds of India (AMFI)

AMFI is an apex body of all Asset Management Companies (AMCs) which
have been registered with SEBI. (Note: AMFI is not a mutual funds regulator)

 ATM – Brown Level ATMs (BLA)

Those Automated Teller Machines where hardware and the lease of the ATM
machine is owned by a service provider, but cash management and
connectivity to banking networks is provided by a sponsor bank whose brand
is used on the ATM. The `brown label' has come up as an alternative between
bank-owned ATMs and White Label ATMs (ATMs set up, owned and operated
by nonbanks are called White Label ATMs. Nonbank ATM operators are
authorized under Payment & Settlement Systems Act, 2007 by the Reserve
Bank of India).

 At-the-money
The exercise price of a derivative that is closest to the market price of the
underlying instrument.

 Balanced Growth of an Economy

Growth of an economy in which all aspects of it especially factors of
production, grow at the same rate
 Balloon Payment
As a balloon looks very little before filling air and seems bigger after filling
with air, same way the payment which is very little at initial stage and at later
stages increases is known as balloon payment.
It is a specific type of mortgage payment, and is named ―balloon payment‖
because of the structure of the payment schedule. For balloon payments, the
first several years of payments are smaller and are used to reduce the total
debt remaining in the loan. Once the small payment term has passed (which
can vary, but is commonly 5 years), the remainder of the debt is due - this final
payment is the one known as the ―balloon‖ payment, because it is larger than
all of the previous payments.

 Bancassurance
Is the term used to describe the partnership or relationship between a bank
and an insurance company whereby the insurance company uses the bank
sales channel in order to sell insurance product.

 Bank Rate
The bank rate, also known as the discount rate, is the rate of interest charged
by the RBI for providing funds or loans to the Banking system in India. It also
signals the medium term stance of monetary policy.
When RBI provides loan to the bank for long term (90 to 365 days).On that
amount of loan RBI takes some interest i.e. called Bank Rate. According to
modern banking definition of BR (Bank Rate) Bank Rate is used by RBI to
provide discount on its securities. So, Bank Rate is known as Discount or
Exchange Rate.

 Bankers Acceptance
Bankers Acceptance is also a money market instrument to meet short term
liquidity requirement. In this company provides bank guarantee to seller to
pay amount of good purchased at an agreed future date. In case buyer failed to
pay on the agreed date, seller can invoke bank guarantee. It is usually used to
finance exports and imports.

 Base Rate
This is the minimum lending rate, below this rate bank cannot provide loan to
anyone.

 Basis Point
It is basically 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
Unfavourable markets associated with falling prices and investor‘s pessimism.

 Bearer Cheque or Open Cheque

When the words "or bearer" appearing on the face of the cheque are not
cancelled, the cheque is called a bearer cheque. The bearer cheque is payable
to the person specified therein or to any other else who presents it to the bank
 for payment. However, such cheques are risky because if such cheques are
lost, the finder of the cheque can collect payment from the bank.

 Bid ask Spread

The difference between a dealer 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.

 Bond Market
Bond market is also known as Debt market. A debt instrument is used by
government or organization to generate funds for longer duration. The
relation between persons investing in debt instrument is of lender and
borrower .This gives no ownership rights. A person receives fixed rate of
interest on debt instrument.
If any company or organization wants to raise money for long term
purpose without diluting his ownership that it is known as
Debentures. These are backed by securities so there is no risk involved but
returns on these instruments is low as compared to shares .Company pay fixed
rate of interest on debentures.
If government wants to generate funds to meet long term needs
like infrastructure it issue bonds known as sovereign bonds which are
backed by government securities so there is no risk involved.

 Book Value
The amount of stockholders‘ equity in a firm equals the amount of the firm‘s
assets minus the firm‘s 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.

 Business Correspondents
Business correspondents are bank representatives. They personally go to the
areas allotted to them and carry out banking.
  They help villagers to open bank accounts.
 They help villagers in banking transactions. (Deposit money, take
money out of savings account, loans etc.)
 The Business Correspondent carries a mobile device.
 The villager gives his thumb impression or electronic signature, and get
the money
 Business Correspondents get commission from bank for every new
account opened, every transaction made via them, every loan
application processed etc.

 CAMELS
CAMELs rating system is a recognized international rating system that bank
supervisory authorities use in order to rate financial institutions according to
6 factors represented by the acronym. Supervisory authorities assign each
bank a score on a scale, a rating of 1 is considered the best and a rating of 5 is
considered the worst for each factor.
C – Capital Adequacy
A – Asset Quality
M – Management
E – Earnings
L – Liquidity
S – Sensitivity
Banks that are given an average score of less than two are considered to be
high-quality institutions while banks with scores greater than three are
considered to be less-than satisfactory institutions.

 CBS System
CBS refers to the software applications for recording transactions, storing
customer information, calculating interest and completing the process of
passing entries in a single database. CBS enables accessing of complete
customer account details centrally. It makes it possible for a bank customer to
access his bank account through whichever channel he prefers like internet
banking, mobile banking, ATM etc.

 CHAPS
CHAPS stands for Clearing House Automated Payment System. It is a type of
electronic bank-to-bank payment system that guarantees same-day payment.

 Call Money
When a bank borrows money from another bank it is called Call Money. It is:
a. Valid for only one day
b. Used to full fill the one day needs of the bank

 Call Option
The right to buy the underlying securities at a specified exercise price on or
before a specified expiration date.

 Callable Bonds
They are the bonds that give the issuer the right to redeem the bonds before
their stated maturity.
 Capital Account Convertibility (CAC)
It is the freedom to convert local financial assets into foreign financial assets
and vice versa. This means that capital account convertibility allows anyone to
freely move from local currency into foreign currency and back, or in other
words, transfer of money from current account to capital account.

 Capital Adequacy Ratio (CAR)

It is a measure of the bank‘s capital. It is also known as ―Capital to Risk
Weighted Assets Ratio (CRAR)‖. This ratio is used to protect depositors and
promote the stability and efficiency of financial systems around the world. It is
decided by the RBI.

 Capital Gain
It is the amount by which the proceeds from the sale of a capital asset exceed
its original purchase price.

 Capital Markets
The markets in which long term securities such as stocks and bonds are
bought and sold are called Capital Markets. Capital market is also very
important part of Indian financial system. This segment of financial market
meant to meet long term financial needs usually more than one year or more.
Companies like manufacturing, infrastructure power generation and
governments which need funds for longer duration period raise money from
capital market. Individuals and financial institutions who have surplus funds
and want to earn higher rate of interest usually invest in capital market.
Capital market can be primary market and secondary market. In primary
market new securities are issued where as in secondary market already issue
securities are traded. Capital market is divided into two
1. Equity
2. Bond

 Cash Credit
It is a short term loan facility under which banks allow its customers to take
loan up to a certain limit, normally bank grants this loan against mortgage of a
certain property

 Cash Management Bills (CMBs)

Government of India, in consultation with the Reserve Bank of India, has
decided to issue a new short term instrument, known as Cash Management
Bills (CMBs), to meet the temporary mismatches in the cash flow of the
Government. Like Treasury bills, they are also issued at a discount and
redeemed at face value at maturity. The tenure, notified amount and date of
issue of the CMBs depend upon the temporary cash requirement of the
Government.

 Cash Reserve Ratio (CRR)

Banks have to maintain or reserve some part of their deposits in RBI in form
of cash which is known as CRR
 CRR has minimum no limit and maximum limit is 20%.
 Before some time back CRR was minimum 3% and maximum 15%
  CRR is calculated on daily basis
 No interest is paid by RBI on CRR
 Banks keep their CRR in currency chest

 Certificate of Deposits (CDs)

Savings instrument in which funds must remain on deposit for a specified
period; and premature withdrawals incur interest penalty.
a) CDs are negotiable money market instrument issued in DEMAT form or as
Promissory Notes.
b) CDs issued by banks should not have the maturity less than seven days and
not more than one year.
c) Financial Institutions are allowed to issue CDs for a period between 1 year
and up to 3 years.
d) CDs are like bank term deposits but unlike traditional time deposits these
are freely negotiable and are often referred to as Negotiable Certificates of
Deposit.
e) CDs normally give a higher return than Bank term deposit.
f) All scheduled banks (except RRBs and Cooperative banks) are eligible to
issue CDs.
g) CDs are issued in denominations of ₹1 Lac and in the multiples of ₹1 Lac
thereafter.
h) Discount/Coupon rate of CD is determined by the issuing bank/Financial
Institutions.
i) Loans cannot be granted against CDs and Banks/Financial Institutions
cannot buy back their own CDs before maturity

 Cheque Truncation
Truncation literally means stopping or cutting short. Thus, truncation of
cheque means stopping the flow of the physical cheque by the presenting bank
(bank where the cheque is presented/dropped off!) en-route to the drawer‘s
bank (bank on which the cheque is drawn on) branch.
Instead of the physical cheque, an electronic image of the cheque is
transmitted to the drawer‘s branch, along with relevant information like data
on the MICR band, date of presentation, presenting bank, etc.
Cheque truncation, thus, removes the need to move the actual physical cheque
from branch to branch.

 CIBIL
It stands for Credit Information Bureau of India Limited.
CIBIL is India‘s first credit information bureau. Whenever a person applies for
a new loan or credit card from a financial institution, they generate the CIBIL
report of the said person or concern to judge the credit worthiness of the
person and also to verify their existing track record. CIBIL actually maintains
the borrower‘s history.

 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.
 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 Papers
Short-Term & unsecured promissory notes issued by corporations with very
high credit standings:
a) A CP is a short term security (7 days to 365 days) issued by a corporate
entity (other than a bank), at a discount to the face value.
b) Commercial Paper (CP) is an unsecured money market instrument issued
in the form of a promissory note.
c) CPs normally gives a higher return than fixed deposits & CDs.
d) CP can be issued in denominations of ₹5 lakh or multiples thereof. Amount
invested by a single investor should not be less than ₹5 lakh (face value).
e) Only corporates who get an investment grade rating can issue CPs, as per
RBI rules. It is issued at a discount to face value.
f) Bank and FI‘s are prohibited from issuance and underwriting of CP‘s.

 Common Stock
Equity investment representing ownership in a corporation, each share
represents a fractional ownership interest in the firm

 Company Crossed Cheque

When two parallel lines along with a crossed made on the cheque and the
word ‗COMPANY‘ written between these lines, then that type of cheque is
called a company crossed cheque. Then the type of withdrawal is not given in
cash to the person on whom the cheque is issued, but it is transferred in his
account. Normally crossed cheque and company crossed cheque are same.

 Compound Interest
Interest paid not only on the initial deposit but also on any interest
accumulated from one period to the next.

 Contract Note
Contract Notes are note which must accompany every security transaction
which contains information such as the dealer‘s 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 differ 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
It is 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 bond‘s value over the conversion
price.

 Convertible Debentures
Debentures which can be converted into shares (but only in equity shares) are
called Convertible Debentures.

 CORE Banking
It stands for Centralized On-line Real-time Exchange Banking. Core Banking
Solution (CBS) is networking of branches, which enables Customers to operate
their accounts, and avail banking services from any branch of the Bank on
CBS network, regardless of where he maintains his account. The customer is
no more the customer of a Branch. He becomes the Bank‘s Customer.
Another interesting fact regarding CBS is that all CBS branches are inter-
connected with each other. Therefore, Customers of CBS branches can avail
various banking facilities from any other CBS branch located anywhere in the
world.

 Corporate Bond
Long term debt issued by private corporations.

 Coupon
The feature on a bond that defines the amount of annual interest income is
defined as coupon.

 Coupon Frequency
The number of coupon payments per year.

 Coupon Rate
The annual rate of interest on the bond‘s face value that a bond‘s issuer
promises to pay the bondholder is coupon rate. It is the bond‘s 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 Authorization Scheme

Credit Authorization Scheme was introduced in November, 1965 when P C
Bhattacharya was the chairman of RBI. Under this instrument of credit
regulation RBI as per the guideline authorizes the banks to advance loans to
desired sectors.

 Credit Ceiling
In this operation RBI issues prior information or direction that loans to the
commercial banks will be given up to a certain limit. In this case commercial
bank will be tight in advancing loans to the public. They will allocate loans to
limited sectors. Few example of ceiling are agriculture sector advances,
priority sector lending.
 Credit Rating
It is 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.

 CRISIL
It stands for Credit Rating Information Services of India Limited. CRISIL is a
global analytical company providing ratings, research, and risk and policy
advisory services.

 Crossed Cheque
Crossing of cheque means drawing two parallel lines on the face of the cheque
with or without additional words like "& CO." or "Account Payee" or "Not
Negotiable". A crossed cheque cannot be en-cashed at the cash counter of a
bank but it can only be credited to the payee's account.

 Currency Board
It is a monetary system in which the monetary base is fully backed by foreign
reserves. Any change in the size of the monetary base has to be fully matched
by the corresponding changes in the foreign reserves.

 Currency Chest
To facilitate the distribution of banknotes and rupee coins, the Reserve Bank
has authorized select branches of scheduled banks to establish Currency
Chests. These are actually storehouses where banknotes and rupee coins are
stocked on behalf of the Reserve Bank.

 Current Deposit Account

Big businessmen, companies and institutions such as schools, colleges, and
hospitals have to make payment through their bank accounts. Since there are
restrictions on number of withdrawals from savings bank account, that type of
account is not suitable for them. They need to have an account from which
withdrawal can be made any number of times. Banks open current account for
them. On this deposit bank does not pay any interest on the balances. Rather
the account holder pays certain amount each year as operational charge.

 Current Yield
A return measure that indicates the amount of current income a bond provide
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 bank‘s nominee, and the deposition of
securities in a designated account with the bank‘s bankers or with any other
institution providing custodial services.

 Debentures
A company borrows money from the public in form of debentures. Debenture
holder is the creditor of the company.
 Debit Service Coverage Ratio (DSCR)
DSCR is a financial ratio that measures the company‘s ability to pay their
debts.

 Default Risk
The possibility that a bond issuer will default (fail to repay principal and
interest in a timely manner) is called default risk.

 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 instruments whose value depends on the value of another asset.

 Direct Action
Direct Action means RBI gives punishment to notorious banks for not abiding
by its guidelines. Punishment can involve: penal interest, refuses to lend them
money and in worst case even cancels their banking license.

 Discounting Bills
In normal day to day business, sellers send bills to buyers whenever they sell
their products and it is mentioned in the bill to make payments in stipulated
time say 30 days. In such conditions seller may discount the bill from bank for
some fees. In such situation bill discounting acts as a short term loan. In case
the buyer or the drawer defaults, banks send the bill back to sellers to drawers
so that he may take legal action against drawers or buyers.

 Discount Bond
It is a bond selling below par, as interest in lieu to the bondholders.

 Diversification
It is 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.

 ECGC
It stands for Export Credit Guarantee Corporation of India. This organisation
provides risk as well as insurance cover to the Indian exporters.

 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) is Earning Yield. The reciprocal is price
earnings ratio (P/E).

 Economic Growth & Economic Development

Economic growth is the process whereby the real per capita income continues
to grow in the long run whereas economic development is the process whereby
the real per capita income increases in the long run along with reduction in
poverty, unemployment and inequality.

 Equity
Equity is ownership of the company in the form of shares of common stock.

 Equity Market
Equity market generally known as stock .In this company want to raise money
issue shares in share market like BSE or NSE to individual or financial
institutions who wants to invest their surplus money

 Equity Call Warrant

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 times.

 Ex-dividend (XD)
A security which no longer carries the right to the most recently declared
dividend or the period of time between the announcement of the dividend and
its 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
stock‘s or unit trust‘s name.

 FCCB
It stands for Foreign Currency Convertible Bond. A type of convertible bond
issued in a currency different from the issuer‘s domestic currency.

 FCNR Accounts
It stands for Foreign Currency Non-Resident accounts. They are the ones that
are maintained by NRIs in foreign currencies like USD, EURO and GBP.

 FDI
FDI stands for Foreign Direct Investment
FDI is when persons/companies who/which are non-Indian, invest in Indian
companies. Thus, through FDI, the investors become the shareholders in
Indian companies and usually have stake that will give them controlling power
of the company.

 FIIs
FII stands for Foreign Institutional Investors. FIIs are persons or companies
incorporated outside India (companies can be Mutual funds, Pension funds,
investment companies, foreign banks etc.), investing in shares of a company –
where their investment is very less.
 They do not have any sizeable investment – they do not have any controlling
power in the company. So, basically FIIs are the financial market players –
and the source of liquidity in the markets. Their investing in the Indian
markets projects a positive image and brings in more investors. There is a
ceiling limit of 24% FII of paid-up capital of an Indian company, and 20% in
case of PSU banks.
The major difference between FDIs and FIIs are that the former actually has a
lot of stake in the company‘s well-being and profitability in the long run
whereas the FIIs want short term returns on the investments. Just like FDIs,
FIIs also bring in Forex but Foreign exchange reserves always favour more
FDIs rather than FIIs as FIIs are the first to abandon the sinking ship!

 Financial Inclusion
It is the delivery of financial services at affordable costs to vast sections of
disadvantaged and low income groups. Financial inclusion involves
1. Give formal banking services to poor people in urban & rural areas.
2. Promote habit of money saving, insurance, pension investment among
poor people.
3. Help them get loans at reasonable rates from normal banks. So they
don‘t become victims in the hands of local moneylender.
Some Important initiatives for financial inclusion:
a. Lead banking scheme (LBS)
b. No frills account
c. BSBDA
d. Business Correspondents (BC) system
e. Swabhiman Campaign
f. Pradhan Mantri Jandhan Yojana

 Fixed Deposit Account (also known as Term Deposit Account)

Many a time people want to save money for long period. If money is deposited
in savings bank account, banks allow a lower rate of interest. Therefore,
money is deposited in a fixed deposit account to earn interest at a higher rate.

 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.

 Foreign Exchange Reserves (FOREX)

Reserves are maintained by countries for meeting their international payment
obligations — both short and long terms, including sovereign and commercial
debts, financing of imports, for intervention in the foreign currency markets
during periods of volatility, besides helping to boost the confidence of the
market in the ability of a country to meet its external obligations and to absorb
any unforeseen external shocks, contingencies or unexpected capital
movements. India's foreign exchange reserves comprise foreign currency
assets, gold and special drawing rights allocated to it by the International
Monetary Fund (IMF) in addition to the reserves it has parked with the fund.
Foreign exchange reserves are held and managed by the RBI. The Foreign
currency assets are investment mainly in instruments abroad which have the
 highest credit rating and which do not pose any credit risk. These include
sovereign bonds, treasury bills and short term deposits in top rated global
banks besides cash accounts.

 Free Float ratio

Free float ratio is number of outstanding shares available for general public to
trade

 Fundamental Analysis
Fundamental Analysis is the 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 Market
Future Markets are commodity markets
In this market dealings are for future. Commodities & metals are traded in
this market. This market is regulated by Forward Market Commission under
the Forward Contract Regulation Act (FCRA).

 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.

 GDP
GDP stands for Gross Domestic Product. GDP is the total value of all final
goods and services currently produced within the domestic territory of a
country in a year.

 GST
GST stands for Goods & Service Tax. It is a combined or ‗one‘ tax on both
goods and services – incorporating the concept of ‗value addition‘ (applying
effort on the goods or services to make it worth more) – extending from
manufacturing to consumption. It is the combination of all indirect taxes in
India. Most important feature of GST is Input Tax Credit which means if
you‘ve paid tax on purchase of any good(s) or procurement of any service and
when selling your goods or services you‘re required to further pay tax, you can
set off your tax payment liability with the tax already paid by you when you
procured your inputs.

 Gift Edge Market

Gift Edge Markets are the government security markets where government
securities are traded. This is low profit market but low risk market. This
 market is not open for public but on the recommendation of government or
RBI opened for public for some time. For Example some time back, RBI
issued the Inflation Index Board (IIB) in this market. This bond had a
maturity period of 3 years.

 Hedge
Hedge is 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 is known as Index Fund.

 Indian Financial System Code (IFSC)

The code consists of 11 characters for identifying the bank and branch where
the account is actually held. The IFSC code is used both by the RTGS and
NEFT transfer systems. The first 4 digits of the IFSC represent the bank and
last 6 characters represent the branch. The 5th character is zero.

 Infrastructure Debt Fund (IDF)

Infrastructure Debt Fund is a company registered as NBFC to facilitate the
flow of long term debt into infrastructure projects. IDF raise resources
through issue of Rupee or Dollar denominated bonds of minimum 5 year
maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDFs

 Infrastructure Finance Company (IFC)

Infrastructure Finance Company is a nonbanking finance company
a) Which deploys at least 75 per cent of its total assets in infrastructure loans
b) Has a minimum Net Owned Funds of ₹300 crore,
c) Has a minimum credit rating of ‗A‘ or equivalent
d) A CRAR of 15%.

 Initial Public Offering (IPO)

IPO is 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.
 When a company issues its share for the first time, it is known as IPO.
 It is a part of primary market
 IPO can be the cheapest share of the company.
 IPO can be more beneficial than any other shares.
 IPO can be issued by unlisted company.

 IPO, FPO and NFO

When a company issues shares for the first time it is an IPO. When a company
launch the share after an IPO, it is known as FPO (Follow on Public Offer).
When a group of companies launch the share or when a company launch the
share for a different scheme than its original one, it is known as NFO (New
 Fund Offer). For example, Closed ended funds: these are traded for a specific
period of time.

 Inside Information
It is the 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

 Inter-bank Mobile Payment Service (IMPS)

It is an instant inter-bank electronic fund transfer service through mobile
phones. Both the customers must have MMID (Mobile Money Identifier
Number). For this service, we don‘t need any GPS-enabled cell phones.

 Intrinsic Value
Intrinsic Value is 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 is known as
an investment adviser.

 Investment Company (IC)

Investment Company means any company which is a financial institution
carrying on as its principal business the acquisition of securities.

 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 Bonds
High risk securities that have received low ratings (i.e. Standard & Poor‘s BBB
rating or below; or Moody‘s BBB rating or below) and as such, produce high
yields, so long as they do not go into default. Junk bonds are issued generally
by smaller or relatively less well-known firms to finance their operations, or
by large and well-known firms to fund leveraged buyouts. These bonds are
frequently unsecured or partially secured, and they pay higher interest rates: 3
to 4 percentage points higher than the interest rate on blue chip corporate
bonds of comparable maturity period.

 LIBID
It stands for London Inter-bank Bid rate. The average interest rate at which
major London banks borrow Eurocurrency deposits from other banks.
 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
bank in the London wholesale money market (or interbank market). The
LIBOR rate is published daily by the British Banker‘s Association and will be
slightly higher than the London Interbank Bid Rate (LIBID), the rate at which
banks are prepared to accept deposits.

 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 are called Leverage
Ratio.

 Limit Order
It is 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
Liquidity is the ability to convert an investment into cash quickly and with
little or no loss in value.

 Liquidity Adjustment Facility (LAF)

Liquidity Adjustment Facility is the primary instrument of Reserve Bank of
India for modulating liquidity and transmitting interest rate signals to the
market. Under the scheme, repo auctions (for absorption of liquidity) and
reverse repo auctions (for injection of liquidity) are conducted on a daily basis
(except Saturdays). It is same day transactions, with interest rates decided on
a cut-off basis and derived from auctions on uniform price basis.

 Listing
Quotation of the Initial Public Offering of the company‘s shares on the stock
exchange for public trading is called Listing

 Listing Date
The date on which Initial Public Offering stocks are first traded on the stock
exchange by the public

 Loan Company (LC)

Loan Company means any company which is a financial institution carrying
on as its principal business the providing of finance whether by making loans
or advances or otherwise for any activity other than its own but does not
include an Asset Finance Company.
 MTSS
Money Transfer Service Scheme
 It is a system of money transfer for transferring personal remittances
from abroad to beneficiaries in India.
  Through this only inward remittances into India are permissible. No
outward remittance allowed.
 A maximum of ₹50,000 can be remitted inwards as per the money
value and a maximum of 30 transactions per calendar year.

 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 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

 Market Stabilisation Scheme (MSS)

This instrument for monetary management was introduced in 2004. Liquidity
of a more enduring nature arising from large capital flows is absorbed through
sale of short dated government securities and treasury bills. The mobilised
cash is held in a separate government account with the Reserve Bank.

 Micro Finance Institution (MFI)

Micro Finance Institution is a non-deposit taking NBFC having not less than
85% of its assets in the nature of qualifying assets which satisfy the following
criteria
a) Loan disbursed by an NBFC-MFI to a borrower with a rural household
annual income not exceeding ₹60,000 or urban and semi-urban household
income not exceeding ₹1,20,000
b) Tenure of the loan not to be less than 24 months for loan amount in excess
of ₹15,000 with prepayment without penalty

 Minimum Reserve System

The Reserve Bank has the sole right to issue currency notes, except one rupee
notes which are issued by the Ministry of Finance. The RBI follows a
minimum reserve system in the note issue. Initially, it used to keep 40 per
cent of gold reserves in its total assets. But, since 1957, it has to maintain only
₹200 crores of gold and foreign exchange reserves, of which gold reserves
should be of the value of ₹115 crores.
 Money Market
Markets in which short term securities are bought and sold are money
markets. It refers to the market for short term requirement and deployment of
funds. Money market instruments are those instruments, which have a
maturity period of less than one year. The most active part of the money
market is the market for overnight call and term money between banks and
institutions and repo transactions. Money Market is regulated by RBI. Money
Market can be further divided into 3 parts. These are:
a) Call Money Market
b) Term Money Market
 c) Notice Money Market
The market to get funds for 1 day only is called as Call Money Market. The
market to get funds for 2 days to 14 days is called as Notice Money Market.
The market to get funds for 15 days to 1 year is called as Term Money Market.
Some of the Money Market instruments are:
1) Commercial Paper
2) Certificate of Deposit
3) Treasury bills
4) Cash Management Bills

 Moral Suasion
Moral Suasions are suggestion and guidelines by the RBI to the commercial
banks to take so and so action and measures in so and so trend of the
economy. RBI may request commercial banks not to give loans for
unproductive purpose which does not add to economic growth but increases
inflation in the economy.

 Mutual Fund
A company that invests in and professionally manages a diversified portfolio
of securities and sells shares of the portfolio to investors

 NEFT
National Electronics Fund Transfer
 It is a nation-wide funds transfer system which facilitates fund transfer
from any bank‘s branch to any other bank‘s branch.
 The difference between NEFT and RTGS is that NEFT settlements
happen in batches and on net settlement basis whereas RTGS is real
time and gross settlement.
 Net Settlement means, that transaction pertaining to a particular bank
branches are kept on hold and accumulated and then processed
together in a batch with the ‗net‘ amount, which would either be
incoming or outgoing transfer.
 There is no limit to minimum/maximum transaction value.
 NEFT cannot be used for foreign remittances.

 Net Asset Value (NAV)

The underlying value of a share of stock in a particular mutual fund also used
with preferred stock

 No Frills Account or BSBD Account

The Basic Savings Bank Deposit Account allows you to bank with a zero
minimum balance requirement. All the existing ‗No frills‘ accounts opened by
the banks are now converted into BSBDA in compliance with the guidelines
issued on August 22, 2012 by the Reserve Bank of India (RBI). BSBDA
guidelines are applicable to ―all scheduled commercial banks in India,
including foreign banks having branches in India‖. Such account requires
either nil minimum balance or very low minimum balance. Charges applicable
to such accounts are low. Services available to such accounts are limited.
 Non-Banking Financial Company (NBFC)
A Non-Banking Financial Company (NBFC) is a company registered under the
Companies Act, 1956 engaged in the business of loans and advances,
acquisition of shares/stocks/bonds/debentures/securities issued by
Government or local authority or other marketable securities of a like nature,
leasing, hire/purchase, insurance business, and chit fund business. NBFCs
lend and make investments and hence their activities are akin to that of
banks; However there are a few differences as given below:
a) NBFC cannot accept demand deposits
b) NBFCs do not form part of the payment and settlement system and cannot
issue cheques drawn on itself
c) Deposit insurance facility of Deposit Insurance and Credit Guarantee
Corporation is not available to depositors of NBFCs, unlike in case of
banks.
Presently, the maximum rate of interest an NBFC can offer is 12.5%. The
interest may be paid or compounded at rests not shorter than monthly rests.
The NBFCs are allowed to accept/renew public deposits for a minimum period
of 12 months and maximum period of 60 months. They cannot accept deposits
repayable on demand. The deposits with NBFCs are not insured. The
repayment of deposits by NBFCs is not guaranteed by RBI.

 Non-Performing Assets (NPAs)

It means once the borrower has failed to make interest or principal payments
for 90 days, the loan is considered to be a non performing asset. A mortgage in
default would be considered nonperforming, after a prolonged period of non-
payment (90 days). The lender will force the borrower to liquidate any assets
that were pledged as part of the debt agreement. If no assets were pledged, the
lenders might write-off the asset as a bad debt and then sell it at a discount to
a collection agency.

 Non-Resident (External) Rupee (NRE) Account

NRE account may be in the form of savings, current, recurring or fixed deposit
accounts. Such accounts can be opened only by the non-resident himself and
not through the holder of the power of attorney. Account is maintained in
Indian Rupees. Accrued interest income and balances held in NRE accounts
are exempt from Income tax. Authorised dealers/authorised banks may at
their discretion allow for a period of not more than two weeks, over-drawings
in NRE savings bank accounts, up to a limit of ₹50,000. Loans up to ₹100
lakhs can be extended against security of funds held in NRE Account either to
the depositors or third parties.

 Non-Resident (Ordinary) Rupee (NRO) Account

NRO accounts may be opened or maintained in the form of current, savings,
recurring or fixed deposit accounts. Interest rates offered by banks on NRO
deposits cannot be higher than those offered by them on comparable domestic
rupee deposits.
 Account should be denominated in Indian Rupees.
 Permissible credits to NRO account are transfers from rupee accounts
of non-resident banks, remittances received in permitted currency from
outside India through normal banking channels, permitted currency
 tendered by account holder during his temporary visit to India,
legitimate dues in India of the account holder like current income like
rent, dividend, pension, interest, etc., sale proceeds of assets including
immovable property acquired out of rupee/foreign currency funds or by
way of legacy/ inheritance.
 NRI/PIO may remit from the balances held in NRO account an amount
not exceeding USD one million per financial year, subject to payment of
applicable taxes.
 The limit of USD 1 million per financial year includes sale proceeds of
immovable properties held by NRIs/PIOs.

 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

 Online, Offline & Standalone ATMs

Online ATMs are connected to the bank‘s database at all times and provide
real time transactions online. The withdrawal limits and account balances are
constantly monitored by the bank. Online ATMs are always watching out for
you!
Offline ATMs are not connected to bank‘s database- hence they have a
predefined withdrawal limit fixed and you can withdraw that amount
irrespective of the balance in your account.
So if you did not have balance in your account, and you went to a ‗offline ATM‘
and withdrew money more than the balance – you‘ll still get the cash at that
time, and later on will run afoul with your bank balance! Where banks may
charge some penalty for exceeding your balance!
Stand Alone ATMs are not connected with any ATM network- hence their
transactions are restricted to the ATM‘s branch and link branches only. The
opposite of Stand Alone ATMs are Networked ATMs, which are connected on
the ATM Network.

 Onsite ATMs and Offsite ATMs

Onsite ATMs are the ATMs you find next to your Bank‘s branch. They go
side-by-side! Or in proper terms, they are the ATMs installed within a
branch‘s premises.
Off-site ATMs are the ones which are installed anywhere, but within the
branch premises. That is these are not installed next to branch. So where are
they installed?
Shopping Malls, shopping markets, airports, hospitals, business areas etc.!

 Open-end (Mutual) Fund

There is no limit to the number of shares the fund can issue. The fund issues
new shares 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 Market Operations
The buying and selling of government securities in the open market in order to
expand or contract the amount of money in the banking system is known as
Open Market Operations. Purchases inject money into the banking system
and stimulate growth while sales of securities do the opposite.

 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

 Order Cheque
When the word "bearer" appearing on the face of a cheque is cancelled and
when in its place the word "or order" is written on the face of the cheque, the
cheque is called an order cheque. Such a cheque is payable to the person
specified therein as the payee, or to any one else to whom it is endorsed
(transferred).

 Over-draft Facility
For the convenience of the current account holders banks allow withdrawal of
amounts in excess of the balance of deposit. This facility is known as overdraft
facility.

 Oversubscribed
When an Initial Public Offering has more applications than actual shares
available it is said to be oversubscribed. 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 public‘s perception of the business
potential of the IPO Company.

 PLR
PLR stands for Prime Lending Rate. On this rate bank provide loan to his
prime customers
 Another name of PLR is BPLR i.e. (Benchmark Prime lending rate)
 PLR is replaced by Base Rate
 Sub PLR : On this rate bank provide loan to unsecured persons
 Most PLR : On this rate bank provide loan to his employees

 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

 Point of Sale (POS)

It is also referred as Point of Purchase. It is a place where sales are made and
also sales and payment information are collected electronically, including the
amount of the sale, the date and place of the transaction, and the consumer‘s
account number.

 Post-dated Cheque
If a cheque bears a date which is yet to come (future date) then it is known as
post-dated cheque. A post-dated cheque cannot be honoured earlier than the
date on the cheque.

 Portfolio
A collection of investment vehicles assembled to meet one or more investment
goals

 Preference Shares
When a corporate security pays a fixed dividend each period it is said to issue
preference shares. 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 (PV)

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 (PVA)

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)

PE Ratio is the measure to determine how the market is pricing the company‘s
common stock. The price/earnings (P/E) ratio relates the company‘s 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 or
before a specified expiration date.

 RTGS
Real Time Gross Settlement
 It is a centralized payment system through which inter-bank payment
instructions are processed and settled, on GROSS basis – in REAL
TIME.
 It simply means that the transactions are settled as they happen.
 Minimum amount is ₹2 lakhs and there is no limit to maximum
amount.
 A ‗service charge‘ is charged by the banks for outwards transactions
(making an RTGS) and nil for inwards transactions (receiving an
RTGS).
 RTGS is used by banks to settle their inter-bank account transactions
as well as customer‘s high value transactions.
 It uses INFINET (Indian Financial Network) platform to operate.

 Rate of Return
A percentage showing the amount of investment gain or loss against the initial
investment

 Real Interest Rate

Real Interest Rate is the net interest rate over the inflation rate. The growth
rate of purchasing power derived from an investment.

 Recurring Deposit Account

This type of account is suitable for those who can save regularly and expect to
earn a fair return on the deposits over a period of time. While opening the
account a person has to agree to deposit a fixed amount once in a month for a
certain period. The total deposit along with the interest therein is payable on
maturity. However, the depositor can also be allowed to close the account
before its maturity and get back the money along with the interest till that
period. The rate of interest allowed on the deposits is higher than that on a
savings bank deposit but lower than the rate allowed on a fixed deposit for the
same period.

 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 stock‘s price that changes over a period of time relative to that of a market
index such as the Standard & Poor‘s 500, usually measured on a scale from 1-
100, 1 being the worst and 100 being the best.

 REPO Rate
It is the rate at which RBI lends money to commercial banks against securities
in case commercial banks fall short of funds for short term. By Increasing
Repo Rate the money supply can be reduced in Market as money becomes
costly (Dearer) thereby controlling inflation (Dear Money Policy) and by
decreasing it money supply can be increased as money becomes cheap thereby
promoting growth (Cheap Money Policy). Indirectly this helps in GDP growth
of India as less Repo Rates most probably leads to less lending rate by banks.
So businesses can buy more loans and invest that money in production.

 Reverse REPO Rate

It is the rate at which RBI borrows money from commercial banks. When
banks have collected more money from public but demand for loans is less
then banks mostly park their money with RBI and receives interest (Reverse
Repo Rate). Reverse Repo Rate is dependent on Repo rates as Reverse Repo
Rate is set to Repo Rate – 1%. RBI gives government securities as collateral to
banks. Officially Repo and Reverse Repo Rates Percentages are in Basis
Points. So 1% means 100 Basis Points.

 Repurchase Agreement
It is an arrangement in which a security is sold and later bought back at an
agreed price and time. Repurchase agreement is also known as Repo. It is a
money market instrument. In this one party sells his asset usually government
securities to other party and agree to buy this asset on future agreed date. The
seller pays an interest rate, called the repo rate, when buying back the
securities. This is like a short term loan given by the buyer of the security to
the seller of the security to meet immediate financial needs.

 Residuary Non-Banking Company (RNBC)

Residuary Non-Banking Company is a class of NBFC which is a company and
has as its principal business the receiving of deposits, under any scheme or
arrangement or in any other manner and not being Investment, Asset
Financing, Loan Company.
a) These companies are required to maintain investments as per directions of
RBI, in addition to liquid assets.
b) The amount payable by way of interest, premium, bonus or other
advantage, by whatever name called by a RNBC in respect of deposits
received shall not be less than the amount calculated at the rate of 5% (to
be compounded annually) on the amount deposited in lump sum or at
monthly or longer intervals; And at the rate of 3.5% (to be compounded
annually) on the amount deposited under daily deposit scheme.
c) Further, a RNBC can accept deposits for a minimum period of 12 months
and maximum period of 84 months from the date of receipt of such
deposit. They cannot accept deposits repayable on demand.
 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 and 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
returns in exchange for greater risk. Risk Taking describes an investor who
will accept a lower return in exchange for greater risk.

 SWIFT
It stands for Society for Worldwide Interbank Financial Telecommunication.
It operates a worldwide financial messaging network which exchanges
messages between banks and other financial institutions.

 Savings Bank Account

This type of account can be opened with a minimum initial deposit that varies
from bank to bank. Money can be deposited any time in this account.
Withdrawals can be made either by signing a withdrawal form or by issuing a
cheque or by using ATM card. Normally banks put some restriction on the
number of withdrawal from this account. Interest is allowed on the balance of
deposit in the account. The rate of interest on savings bank account varies
from bank to bank and also changes from time to time. A minimum balance
has to be maintained in the account as prescribed by the bank. Interest rate is
paid to the account holders on daily balance basis.

 Senior Bond
A bond that has priority over other bonds in claiming assets and dividends

 Self-Cheque
A self-cheque is written by the account holder as pay self to receive the money
in the physical form from the branch where he holds his account.

 Short Hedge
A transaction that protects the value of an asset held by taking a short position
in a future contract

 Settlement
Conclusion of a securities transaction when a customer pays a broker/dealer
for securities purchased or delivered, securities sold and received from the
broker for 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 and their return to the lender.

 Small Coin Depot

Some bank branches are also authorized to establish Small Coin Depots to
stock small coins. The Small Coin Depots also distribute small coins to other
bank branches in their area of operation.

 Soiled, Mutilated & Imperfect Bank notes

A soiled note means a note which, has become dirty due to usage and also
includes a two piece note pasted together wherein both the pieces presented
belong to the same note, and form the entire note.
A mutilated banknote is a note, of which a portion is missing or which is
composed of more than two pieces.
An imperfect banknote means any note, which is wholly or partially,
obliterated, shrunk, washed, altered or indecipherable but does not include a
mutilated banknote.
Soiled & Mutilated banknotes can be exchanged for value while an imperfect
banknote has no value.

 Special Drawing Rights (SDR)

It is an interest bearing international reserve asset created by the IMF in 1969
to supplement other reserve assets of member countries. The SDR is based on
a basket of international currencies comprising the U.S. dollar, Japanese yen,
euro and pound sterling. It is not a currency, nor a claim on the IMF, but is
potentially a claim on freely usable currencies of IMF members. It can be held
and used by member countries, the IMF, and certain designated official
entities called "prescribed holders"—but it can‘t be held, for example, by
private entities or individuals.
 Speculation
The process of buying investment vehicles in which the future value and level
of expected earnings are highly uncertain

 Stale Cheque
If a cheque is presented for payment after 3 months from the date of the
cheque it is called stale cheque. A stale cheque is not honoured by the bank.

 Stock Exchange
Stock Exchange is essentially an organization – which enables the trade in
shares by providing a ‗trading area‘, staff, infrastructure and making
connections between buyers and sellers and agents possible. Every stock
exchange has its rules and regulations, which any company which wishes to
get listed with it have to comply with.
 Stock Index
Stock Index is a numeric/ statistical measurement – an index – a number –
which shows the performance of an economy taking some key companies (a
segment of stock market) as its indicator.
In other words – it is an ‗index‘ which includes some stocks of some
companies – the prices of these companies are measured and put through – to
give us the stock market index – the overall picture!
Through these indexes, investors, company owners, economists, traders etc. –
who are known as stakeholders – glean useful information depending on their
needs. An investor will invest if the markets are doing well and keep his
money on the company showing progress – where performance falls – the
investors take their monies away from the markets and that is when the
indexes fall!
So more the positive activity – index rises – and vice versa.

 Stock Market
Stock Market is a market (a real/virtual market) where stocks or shares are
bought and sold – companies raise money through stock markets. In stock
markets the shares of those companies which are listed with the Stock
Exchange are bought and sold.
Stock markets will have stocks of numerous companies – at various price
levels – activity levels floating around.

 Stock Splits
Stock Splits are defined as the 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
Subordinated Bonds are issues that rank 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
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.

 Sustainable Development
Sustainable development is a development that does not deplete resources
irreversibly. It is a process of development that meets the needs of the present
without comprising the ability of future generations to meet their own needs.

 Tax
A tax is a mandatory financial charge or some other type of levy imposed upon
a taxpayer by a governmental organization in order to fund various public
expenditures.
 Excise Duty is a tax on the manufacturing of excisable goods. Thus if a
manufacturer, manufactures those goods which the central government has
deemed to be ‗excisable‘ good(s) – then the manufacturer will have to pay
excise duty on those goods.
Service Tax is a tax on ‗services rendered‘ which are not in the ‗negative list‘.
Thus – all services rendered are under the blanker of service tax – except for
those which are mentioned in the negative list!
VAT – or Value Added Tax is a stage wise levy of tax on value addition – thus
at every stage of ‗value addition‘ VAT is levied and passed on to the next
person in the chain of changing hands.
Sales Tax is a tax on sale of goods – interstate and intrastate.
GST – Goods & Service Tax is a combined or ‗one‘ tax on both goods and
services. It is the combination of all indirect taxes in India.

 Technical Analysis
Technical Analysis are methods 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. They are
usually 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 intraday quotations, permissible
spreads according to the prices of securities available for trading and board lot
size for each security.

 Treasury Bills
Treasury Bills are short term (up to one year) borrowing instruments of the
Government of India.
a) It enables investors to park their short term surplus funds while reducing
their market risk.
b) They are auctioned by Reserve Bank of India at regular intervals and
issued at a discount to face value.
c) Any person in India including Individuals, Firms, Companies, Corporate
bodies, Trusts and Institutions can purchase Treasury Bills.
d) Treasury Bills are eligible securities for SLR purposes.
e) Treasury Bills are available for a minimum amount of ₹25,000 and in
multiples of ₹25,000 thereafter.
f) At present, RBI issues Treasury Bills for three different maturities: 91 days,
182 days and 364 days.

 Trust Deed
Trust Deed is a formal document that creates a trust. It states the purpose and
terms of the name of the trustees and beneficiaries.
 Umbrella Fund
It is a type of collective investment scheme. It is a collective fund containing
several sub-funds, each of which invests in a different market or country.

 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
Warrant is 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 records

 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 investor‘s 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