Tuesday, 16 September 2014

BUDGET 2014-15 HIGHLIGHTS

Indian current  Finance Minster Arun Jaitley presented the Narendra Modi Government’s maiden
Budget for the year 2014-15 on 10th July 2014. In this budget the  govenrment mainly
focused to keep up their election promises. The main highlights of this budget are, raising
the personal tax exemption limit by Rs. 50,000, raising the Foreign Direct Investment (FDI) limit
to 49%, Ganga Conservation Mission called 'Namami Gange' with Rs 2,037, Increasing safety of
women in large cities with Rs. 150 crores, setting up 100 smart cities with Rs 7,060 crore,
National Rural Internet and Technology Mission etc. Delivering his maiden Budget, finance
minister Arun Jaitley told Parliament that India's 1.2 billion people were "exasperated" after two
years of economic growth below 5 per cent. He has confidently stated that this budget can revive
growth after the longest slowdown in a quarter of a century even while curbing borrowing.
Below are the Highlights of Union Budget 2014-15.

Highlights 



1) Tax slab on personal income remains unchanged

2) Income tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to
Rs 3 lakh

3) Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh
from Rs 1 lakh.

4) Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh

5) Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs
1.5 lakh.

6) Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover
to be launched

7) Long term capial gain tax for mutual funds doubled to 20 pc; lock-in period increased to
3 years

8) Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from
Rs 6,500 to Rs 15,000

9) Minimum pension increased to Rs 1,000 per month

10) LCD, LED TV become cheaper

11) Cigarettes, pan masala, tobacco, aerated drinks become costlier

12) 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan

13) 5 more IITs in Jammu, Chattisgarh, Goa, Andhra Pradesh and Kerala.

14) 4 more AIIMS like institutions to come up in Andhra Pradesh, West Bengal, Vidarbha in

15) Maharashtra and Poorvanchal in Uttar Pradesh

16) Govt proposes to launch 'Digital India’ programme to ensure broad band connectivity at
village level

17) Kisan TV for farmers, Arun Prabha TV for northeast.

18) National Rural Internet and Technology Mission for services in villages and schools,
training in IT skills proposed

19) Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology

20) A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between
Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.

21) EPFO to launch the “Uniform Account Number” Service for contributing members.

22) New programme “Neeranchal” to give impetus to watershed development in the country
with an initial outlay of Rs. 2142 crores.

23) Beti Bachao, Beti Padhao Yojana to generate awareness and help in improving the
efficiency of delivery of welfare services meant for women.

24) Free Drug Service and Free Diagnosis Service to achieve “ Health For All”

25) Two National Institutes of Ageing to be set up at AIIMS, New Delhi and Madras Medical
College, Chennai.

26) Rs 100 crore to support about 600 new and existing Community Radio Stations

27) Swachh Bharat Abhiyan to cover every household with sanitation facility by the year
2019

28) Rs 100 crore for metro projects in Lucknow and Ahmedabad

29) Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami
Gange’

30) Rs 150 crore allocated for increasing safety of women in large cities

31) Rs. 7,060 crore for the project of developing 100 Smart Cities.

32) Set aside Rs 11,200 crore for PSU banks capitalization

33) Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants

34) 1000 crore provided for “Pradhan Mantri Krishi Sinchayee Yojna” for assured irrigation.

35) Rs. 50,548 crore under the SC Plan and Rs. 32,387 crore under TSP

36) Composite cap of foreign investment to be raised to 49 per cent in Defence and Insurance
sectors.

37) Requirement of the built up area and capital conditions for FDI reduced to 20,000 square
metres and USD 5 million respectively for development of smart cities.

38) Manufacturing can sell its products through retail including Ecommerce platforms.

39) Requirement to infuse Rs.2,40,000 crore as equity by 2018 in our banks to be in line with
Basel-III norms PSUs will invest through capital investment a total sum of Rs. 2,47,941
crores.

40) Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the
urban poor/EWS/LIG segment.

41) Govt in favour of consolidation of PSU banks

42) Govt considering giving greater autonomy to PSU banks while making them accountable

43) Government expects Rs 9.77 lakh crore revenue crore from taxes

44) Plan expenditure pegged at Rs 5.75 lakh crore and non-plan at Rs 12.19 lakh crore.

45) Fiscal deficit target retained at 4.1 pc of GDP for current fiscal and 3.6 pc in FY 16

46) Disinvestment target fixed at Rs 58,425 crore

47) Gross borrowings pegged at Rs 6 lakh crore

48) Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.

49) Committee to look into all fresh tax demands for indirect transfer of assets in wake of
retrospective tax amendments of 2012

50) Expenditure management commission to be setup; will look into food and fertilizer
subsides

51) Legislative and administrative changes to sort out pending tax demands of more than Rs.
4 lakh crore under dispute and litigation.

52) New Urea Policy would be formulated.

53) More productive, asset creating and with linkages to agriculture and allied activities wage
employment would to be provided under MGNREGA.

54) A committee will to examine and recommend how unclaimed amounts with PPF, Post
Office, saving schemes etc. can be used to protect and further financial interests of the
senior citizens

55) Slum development to be included in the list of Corporate Social Responsibility

56) Committee to examine the financial architecture for MSME Sector, remove bottlenecks
and create new rules and structures to be set up and give concrete suggestions in three
months.

57) An institution to provide support to mainstreaming PPPPs called 4PIndia to be set up
with a corpus of Rs. 500 crores.

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Monday, 15 September 2014

Computers Awareness and Marketing

This test is for understanding of basic marketing and computer concepts to help in various competitive exams.

1. To combat the menace of money laundering, which of the following financial institutions has introduced the 'Know Your Customer' Scheme?
(1) IDBI
(2) RBI
(3) NABARD
(4) SIDBI
(5) Other than those given as options

Q.2. Which of the following sectors contributes maximum in deciding the growth in income of the states in India?
(1) Energy
(2) Tourism
(3) Service
(4) Transport
(5) Agriculture

Q.3. Which of the following is the state where the number of people living below poverty line is maximum?
(1) Bihar
(2) Andhra Pradesh
(3) Uttar Pradesh
(4) Rajasthan
(5) Orissa

Q.4. Who is the person closely associated with operation flood programmes and was honoured by Padma Vibhushan recently?
(1) Dr. V. Kurien
(2) Dr. M. S. Swaminathan
(3) Dr. Amartya Sen
(4) Dr. A. P. J. Abdul Kalam
(5) Other than those given as options

Q.5. Which of the following factors influences buyer's behaviour?
(1) Cultural and Social factors
(2) Economical and external factors
(3) Personal and Psychological factors
(4) both (1) & (2) or
(5) both (1) & (3)

Q.6. Marketing for promotion of business in Banks involves :
(1) Better Customer Service
(2) Customer need identification
(3) Customised products
(4) both (1) & (3)
(5) All (1), (2) & (3)

Q.7. 1010, 0101, 1100, 0011, 11100 --- what is next?
(1) 00100
(2) 00111
(3) 11100
(4) 10111
(5) 01010

Q.8. The function of CPU is ---
(1) to provide external storage of text
(2) to create a hard copy
(3) to create a new software
(4) to read, interpret and process the information and instruction
(5) Other than those given as options

Q.9. Pick the odd man out.
(1) Monitor
(2) Keyboard
(3) Floppy drive
(4) Windows
(5) Hard-disk drive

Q.10. The full form of LAN is ---
(1) Local Access Network
(2) Local Area Network
(3) Long Area Node
(4) Local Area Node
(5) Other than those given as options

ANSWERS:

1) 2
2) 3
3) 5
4) 1
5) 5
6) 5
7) 5
8) 5
9) 1
10) 2
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Monday, 8 September 2014

STATE BANK OF INDIA

The Origin of the State Bank of India goes back to the first decade of the 19th century with establishment of the bank of Calcutta in Calcutta on 2 June 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal (2 January 1809). A unique institution, it was the first joint- stock bank of British India sponsored by The Government of Bengal. The Bank of Bombay (15 April 1840) and the bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at the apex of modern Banking in India till their Amalgamation as the Imperial Bank of India on 27 January 1921.


Headquarters: Mumbai

Founded on: July 1st, 1956


Tag Line: PURE BANKING, NOTHING ELSE", "WITH YOU – ALL THE WAY", "A BANK OF THE COMMON MAN", "THE BANKER TO EVERY INDIAN", "THE NATION BANKS ON US

Employees: 295,696 [2012]

Associate Banks:


1. State Bank of Bikaner and Jaipur – Jaipur (Head Office)

2. State Bank of Hyderabad – Hyderabad (Head Office)

3. State Bank of Mysore – Bangalore (Head Office)

4. State Bank of Patiala – Patiala (Head office)

5. State Bank of Travancore – Poojappura, Thiruvananthapuram (Head Office)


About SBI


SBI is one of the big four banks of India, along with ICICI bank, Punjab National Bank and Bank of Baroda

SBI had 14,816 branches in India as on 31 March 2013

SBI is the first bank to open branch in China

15000th branch of the State Bank of India (SBI) at Sooranam (Tamil Nadu)

SBI has 21, 500 branches (including Assosiate Banks )

SBI has 99, 345 offices in India

SBI has 27000+ ATM and SBI Group (including Assosiate Banks ) has 32752 ATMs.

On October 7, 2013, Arundhati Bhattacharya became the first woman to be appointed Chairperson of the bank

SBI has become the first bank to install an ATM at Drass in the Jammu & Kashmir Kargil region. This was the Bank's 27,032nd ATM on 27 July 2012.


Awards List (2013-14)

1.         The Banker (1) in the year 2009

2.         IDRBT (3)

3.         D & B Polaris (1)

4.         SKOCH (3)

5.         SKOCH CORPORATE EXCELLENCE

6.         PC QUEST

7.         EDGE AWARD (2)

8.         Asia's best CSR Practices Awards 2013-Singapore

9.        Asian BFSI Awards 2013- Dubai

10.      India's Most Ethical Companies awards 2013

11.      Asian Green Future Leadership Awards 2013

12.       Best Public Sector Bank Award 2013

13.       Won national award in the year 2012 for Prime Minister's Employment Generation Programme (PMEGP) scheme

14.       Technology of the year by the IBA banking technology awards

15.       Best online banking award in 2010 by IBA

16.       Best rural banking initiative and best IT architecture

17.       THE BEST BANK in cash management services in Asia

18.       Pegasus Corporate Social Responsibility Award 2007



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Friday, 29 August 2014

Banking GK

1.If PAN details are not provide, the TDS is deducted at which of the following rates?

(1) 10%
(2) 20%
(3) 10% for senior citizens & 20% for others
(4) 10% plus 10% surcharge
(5) None of the above


2.Who decides on the quantity of coins to be minted?
(1) the Government of India
(2) RBI
(3) Either 1 or 2
(4) All of the above
(5) None of the above

3.Who can invest in a Commercial Paper?
(1) Individuals
(2) Banking companies
(3) Corporate bodies registered or incorporated in India and unincorporated bodies, Non- resident Indians (NRIs) and Foreign Institutional Investor (FIIs)
(4) All of the above
(5) None of the above

4.Who among the following has not won the Gold medal in the recently concluded 2014 Commonwealth Games?
(1) Apurvi Chandela
(2) Pinki Rani
(3) Amit Kumar
(4) Sukhen Dey
(5) Vinesh Phogat

5.Recently Ebola has outbreak in four West African countries and 932 people were killed by this virus. Which among the following countries is not the centre of outbreak?
(1) Liberia
(2) Sierra Leone
(3) Nigeria
(4) Guinea
(5) Namibia


6.Recently Union Government granted Navratna Status to which company ?
(1) Power Grid corporation of India
(2) Nuclear power corporation of India
(3) NALCO
(4) Hindustan Aeronautics Limited
(5) Container Corporation of India Limited

7.Who won the Golden glove award in 2014 Fifa World cup ?
(1) Manuel Neuer
(2) Lionel Messi
(3) Ochua
(4) Micheal Kameani
(5) James Rodriguez

8.A advisory group of the RBI recommended creating BBPS to facilitate single window to pay all bills. What does BBPS stands for?
(1) Bank-Based Payment Services
(2) Broad-Based Payment Services
(3) Bharat Bill Provisioning Services
(4) Bharat Bill Provisioning Services
(5) Bharat Bill Payment System

9.FDI Cap in Defence sector has been raised from 26 percent to:
(1) 34 percent
(2) 41 percent
(3) 46 percent
(4) 49 percent
(5) 74 percent

10.Kargil Vijay Diwas is celebrated on?
(1) July 14
(2) July 18
(3) 25 July
(4) July 22
(5) July 26

11.Nhava Sheva is the largest container port in India. It is situated in which of the following States?
(1) Andhra Pradesh
(2) Odisha
(3) Maharashtra
(4) Karnataka
(5) Gujarat

12.Who among the following is not a Padma Bhushan award winner in 2014?
(1) Leander Paes
(2) P.Gopichand
(3) K. Radhakrishnan
(4) Ruskin Bond
(5) B.K.S. Iyengar

13.Karnataka won the Ranji Trophy Cricket for the seventh time by defeating which of the following teams in the final in January 2014?
(1) Maharashtra
(2) Punjab
(3) Kerala
(4) Mumbai
(5) Baroda

14.How many languages in India have got classical language status at present?
(1) 3
(2) 2
(3) 6
(4) 4
(5) 5

15.What is India's rank at the 2014 Environmental Performance Index?
(1) 77
(2) 155
(3) 118
(4) 73
(5) 148




ANSWERS:

1) 2;
2) 1;
3) 4;
4) 2;
5) 5;
6) 5;
7) 1;
8) 5;
9) 4;
10) 5;
11) 3;
12) 5;
13) 1;
14) 3;
15) 2;
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Wednesday, 27 August 2014

Headquarter of Different Nationalized Bank

Headquarter of Different Nationalized Bank  given bellow.


Allahabad Bank — Kolkata

Bank of India — Mumbai

Bank of Maharashtra — Pune

Canara Bank — Bangalore

Central Bank of India — Mumbai

Corporation Bank — Mangalore

Dena Bank — Mumbai

Indian Bank — Chennai

Indian Overseas Bank — Chennai

Oriental Bank of Commerce — New Delhi

 Punjab National Bank — New Delhi

Punjab & Sind Bank — New Delhi

Syndicate Bank — Manipal

UCO Bank — Kolkata

Union Bank of India — Mumbai

United Bank of India — Kolkata

Vijaya Bank — Bangalore

Andhra Bank — Hyderabad

Bank of Baroda — Vadodara
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Banking Awareness Abbreviations

Some important banking awareness abbreviations from Banking exams.

AML –Anti Money Laundering
APBS – AADHAAR payment bridge system 
BC – Business correspondents
BF – Business facilitators
CFT –Combatting of financial terrorism
CDR – Corporate Debt Restructuring
CDS – Credit Default Swaps
SME – Small and Medium Enterprises 
IRS – Interest Rate Swaps
 FII – Foreign Institutional Investors
RRB – Regional Rural Banks
 PDC – Post Dated Cheques
MSE – Micro and Small Enterprises
DCCO – Date of commencement of commercial operations
CRAR – Capital to Risk weighted assets ratio
 IBL – Inter bank liability
PSL – Priority sector lending
NBFC – Non Banking Financial Company
WPI – Wholesale price Index
CPI – Consumer Price Index
LAF – Liquidity adjustment facility
 NDTL – Net Demand and Time Liabilities
UCB – Urban Cooperative Bank
ECS – Electronic clearing service
FSLRC – Financial Sector Legislative Reforms Commission
UCIC – Unique Customer Identification Code
GDS – Gold deposit scheme
CAD – Current account deficit 
MFIN – Micro Finance Institutions Network
IRDA – Insurance Regulatory Development Authority
CRMPG – Counterparty Risk Management Policy Group
DSA – Direct selling agents
DMA – Direct marketing agents
DRA – Debt Recovery agents
ELA – Emergency Liquidity assistance
BOP – Balance of payments
FDI – Foreign direct investment
MSF – Marginal standing facility
FFA – Forward freight agreements
BIS – Bank for international settlements
BR act – Banking Regulation act
MCX – Multi commodity exchange
PSB – Public sector banks 
HTM – Held to maturity
SLR – Statutor y Liquidity Ratio
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Monday, 23 June 2014

Banking Technologies

 
Anytime Banking : With introduction of ATMs, Tele-Banking and internet banking, customers can conduct their business anytime of the day and night. The 'Banking Hours' is not a constraint for transacting banking business.

Anywhere Banking : Refers to banking not only by ATMs, Tele-Banking and internet banking, but also to core banking solutions brought in by banks where customer can deposit his money, cheques and also withdraw money from any branch connected with the system. All major banks in India have brought in core banking in their operations to make banking truly anywhere banking.

ATM : ATMs are Automatic Teller Machines, which do the job of a teller in a bank through Computer Network. ATMs are located on the branch premises or off branch premises. ATMs are useful to dispense cash, receive cash, accept cheques, give balances in the accounts and also give mini-statements to the customers.

Bank Ombudsman : Bank Ombudsman is the authority to look into complaints against Banks in the main areas of collection of cheque / bills, issue of demand drafts, non-adherence to prescribed hours of working, failure to honour guarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and advances where banks flout directions / instructions of RBI. This Scheme was announced in 1995 and is functioning with new guidelines from 2007. This scheme covers all scheduled banks, the RRBs and co-operative banks.

Bancassurance : Bancassurance refers to the distribution of insurance products and the insurance policies of insurance companies which may be life policies or non-life policies like home insurance - car insurance, medi-policies and others, by banks as corporate agents through their branches located in different parts of the country by charging a fee.

Banker's Lien : Bankers lien is a special right of lien exercised by the bankers, who can retain goods bailed to them as a security for general balance of account. Bankers can have this right in the absence of a contract to the contrary.

Banking : Accepting for the purpose of lending or investment of deposits of money from Public, Repayable on demand or otherwise and withdrawable by cheques, drafts, order, etc.

Basel-II : The Committee on Banking Regulations and Supervisory Practices, popularity known as Basel Committee, submitted its revised version of norms in June, 2004. Under the revised accord the capital requirement is to be calculated for credit, market and operational risks. The minimum requirement continues to be 8% of capital fund (Tier I & II Capital) Tier II shall continue to be not more than 100% of Tier I Capital.

Brick & Mortar Banking : Brick and Mortar Banking refers to traditional system of banking done only in a fixed branch premises made of brick and mortar. Now there are banking channels like ATM, Internet Banking,tele banking etc.

Business of Banking : Accepting deposits, borrowing money, lending money, investing, dealing in bills, dealing in Foreign Exchange, Hiring Lockers, Opening Safe Custody Accounts, Issuing Letters of Credit, Traveller's Cheques, doing Mutual Fund business, Insurance Business, acting as Trustee or doing any other business which Central Government may notify in the official Gazette.

Bouncing of a cheque : Where an account does not have sufficient balance to honour the cheque issued by the customer , the cheque is returned by the bank with the reason "funds insufficient" or "Exceeds arrangement".This is known as 'Bouncing of a cheque' .

Certificate of Deposit :. Certificate of Deposits are negotiable receipts in bearer form which can be freely traded among investors. This is also a money market instrument,issued for a period ranging from 7 days to f one year .The minimum deposit amount is Rs. 1 lakh and they are transferable by endorsement and delivery.

Cheque : Cheque is a Bill of Exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.

Cheque Truncation : Cheque truncation, truncates or stops the flow of cheques through the banking system. Generally truncation takes place at the collecting branch, which sends the electronic image of the cheques to the paying branch through the clearing house and stores the paper cheques with it.

Collecting Banker : Also called receiving banker, who collects on instruments like a cheque, draft or bill of exchange, lodged with himself for the credit of his customer's account.

Consumer Protection Act : It is implemented from 1987 to enforce consumer rights through a simple legal procedure. Banks also are covered under the Act. A consumer can file complaint for deficiency of service with Consumer District Forum for amounts upto Rs.20 Lacs in District Court, and for amounts above Rs.20 Lacs to Rs.1 Crore in State Commission and for amounts above Rs.1 Crore in National Commission.

Co-operative Bank : An association of persons who collectively own and operate a bank for the benefit of consumers / customers, like Saraswat Co-operative Bank or Abhyudaya Co-operative Bank and other such banks.

Co-operative Society : When an association of persons collectively own and operate a unit for the benefit of those using its services like Apna Bazar Co-operative Society or Sahakar Bhandar or a Co-operative Housing Society.

Core Banking Solutions (CBS) : Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.

Creditworthiness : It is the capacity of a borrower to repay the loan / advance in time alongwith interest as per agreed terms.

Crossing of Cheques : Crossing refers to drawing two parallel lines across the face of the cheque.A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing.A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.

Current Account : Current account with a bank can be opened generally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account.

Customer : A person who maintains any type of account with a bank is a bank customer. Consumer Protection Act has a wider definition for consumer as the one who purchases any service for a fee like purchasing a demand draft or a pay order. The term customer is defined differently by Laws, softwares and countries.

Debit Card : A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.

Debtor : A person who takes some money on loan from another person.

Demand Deposits : Deposits which are withdrawn on demand by customers.E.g. savings bank and current account deposits.

Demat Account : Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.

Dishonour of Cheque : Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.

Debit Card : A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.

Debtor : A person who takes some money on loan from another person.

Demand Deposits : Deposits which are withdrawn on demand by customers.E.g. savings bank and current account deposits.

Demat Account : Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.

Dishonour of Cheque : Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.

E-Banking : E-Banking or electronic banking is a form of banking where funds are transferred through exchange of electronic signals between banks and financial institution and customers ATMs, Credit Cards, Debit Cards, International Cards, Internet Banking and new fund transfer devices like SWIFT, RTGS belong to this category.

EFT - (Electronic Fund Transfer) : EFT is a device to facilitate automatic transmission and processing of messages as well as funds from one bank branch to another bank branch and even from one branch of a bank to a branch of another bank. EFT allows transfer of funds electronically with debit and credit to relative accounts.

Either or Survivor : Refers to operation of the account opened in two names with a bank. It means that any one of the account holders have powers to withdraw money from the account, issue cheques, give stop payment instructions etc. In the event of death of one of the account holder, the surviving account holder gets all the powers of operation.

Electronic Commerce (E-Commerce): E-Commerce is the paperless commerce where the exchange of business takes place by Electronic means.

Endorsement : When a Negotiable Instrument contains, on the back of the instrument an endorsement, signed by the holder or payee of an order instrument, transferring the title to the other person, it is called endorsement.

Endorsement in Blank : Where the name of the endorsee or transferee is not mentioned on the instrument.

Endorsement in Full : Where the name of the endorsee or transferee appears on the instrument while making endorsement.

Execution of Documents : Execution of documents is done by putting signature of the person, or affixing his thumb impression or putting signature with stamp or affixing common seal of the company on the documents with or without signatures of directors as per articles of association of the company.

Factoring : Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.

Foreign Banks : Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.

Forfaiting : In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.

Forgery : when a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.

Garnishee Order : When a Court directs a bank to attach the funds to the credit of customer's account under provisions of Section 60 of the Code of Civil Procedure, 1908.

General Lien : A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt.

Guarantee : A contract between guarantor and beneficiary to ensure performance of a promise or discharge the liability of a third person. If promise is broken or not performed, the guarantor pays contracted amount to the beneficiary.

Holder : Holder means any person entitled in his own name to the possession of the cheque, bill of exchange or promissory note and who is entitled to receive or recover the amount due on it from the parties. For example, if I give a cheque to my friend to withdraw money from my bank,he becomes holder of that cheque. Even if he loses the cheque, he continues to be holder. Finder cannot become the holder.

Holder in due course : A person who receives a Negotiable Instrument for value, before it was due and in good faith, without notice of any defect in it, he is called holder in due course as per Negotiable Instrument Act. In the earlier example if my friend lends some money to me on the basis of the cheque, which I have given to him for encashment, he becomes holder-in-due course.

Hypothecation : Charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. In pledge, possession of property is passed on to the lender but in hypothecation, the property remains with the borrower in trust for the lender.

Identification : When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.

Indemnifier : When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others' actions.

Indemnity : Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.

Insolvent : Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.

Interest Warrant : When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.

International Banking : involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.

Introduction : Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.

JHF Account : Joint Hindu Family Account is account of a firm whose business is carried out by Karta of the Joint family, acting for all the family members.. The family members have common ancestor and generally maintain a common residence and are subject to common social, economic and religious regulations.

Joint Account : When two or more individuals jointly open an account with a bank.

Karta : Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.

Kiosk Banking : Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.

KYC Norms : Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.

Law of Limitation : Limitation Act of 1963 fixes the limitation period of debts and obligations including banks loans and advances. If the period fixed for particular debt or loan expires, one can not file a suit for is recovery, but the fact of the debt or loan is not denied. It is said that law of limitation bars the remedy but does not extinguish the right.

Lease Financing : Financing for the business of renting houses or lands for a specified period of time and also hiring out of an asset for the duration of its economic life. Leasing of a car or heavy machinery for a specific period at specific price is an example.

Letter of Credit : A document issued by importers bank to its branch or agent abroad authorizing the payment of a specified sum to a person named in Letter of Credit (usually exporter from abroad). Letters of Credit are covered by rules framed under Uniform Customs and Practices of Documentary Credits framed by International Chamber of Commerce in Paris.

Limited Companies Accounts : Accounts of companies incorporated under the Companies Act, 1956 . A company may be private or public. Liability of the shareholders of a company is generally limited to the face value of shares held by them.

Mandate : Written authority issued by a customer to another person to act on his behalf, to sign cheques or to operate a bank account.

Material Alteration : Alteration in an instrument so as to alter the character of an instrument for example when date, amount, name of the payee are altered or making a cheque payable to bearer from an order one or opening the crossing on a cheque.

Merchant Banking : When a bank provides to a customer various types of financial services like accepting bills arising out of trade, arranging and providing underwriting, new issues, providing advice, information or assistance on starting new business, acquisitions, mergers and foreign exchange.

Micro Finance: Micro Finance aims at alleviation of poverty and empowerment of weaker sections in India. In micro finance, very small amounts are given as credit to poor in rural, semi-urban and urban areas to enable them to raise their income levels and improve living standards.

Minor Accounts : A minor is a person who has not attained legal age of 18 years. As per Contract Act a minor cannot enter into a contract but as per Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive payment on a Negotiable Instrument so as to bind all the persons, except himself. In order to boost their deposits many banks open minor accounts with some restrictions.

Mobile Banking : With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates.

Money Laundering : When a customer uses banking channels to cover up his suspicious and unlawful financial activities, it is called money laundering.

Money Market : Money market is not an organized market like Bombay Stock Exchange but is an informal network of banks, financial institutions who deal in money market instruments of short term like CP, CD and Treasury bills of Government.

Moratorium : R.B.I. imposes moratorium on operations of a bank; if the affairs of the bank are not conducted as per banking norms. After moratorium R.B.I. and Government explore the options of safeguarding the interests of depositors by way of change in management, amalgamation or take over or by other means.

Mortgage : Transfer of an interest in specific immovable property for the purpose of offering a security for taking a loan or advance from another. It may be existing or future debt or performance of an agreement which may create monetary obligation for the transferor (mortgagor).

NABARD : National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.

Negotiation : In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.

Non-Fund Based Limits : Non-Fund Based Limits are those type of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.

Non-Resident : A person who is not a resident of India is a non-resident.

Non-Resident Accounts : Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.

Notary Public : A Lawyer who is authorized by Government to certify copies of documents .

NPA Account : If interest and instalments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.

Off Balance Sheet Items : Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.

Online Banking : Banking through internet site of the bank which is made interactive.

Pass Book : A record of all debit and credit entries in a customer's account. Generally all banks issue pass books to Savings Bank/Current Account Holders.

Personal Identification Number (PIN) : Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .

Plastic Money : Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.

Pledge : A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.

Post-Dated Cheque : A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.

Power of Attorney : It is a document executed by one person - Donor or Principal, in favour of another person , Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.

Premature Withdrawals : Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.

Prime Lending Rate (PLR) : The rate at which banks lend to their best (prime) customers.

Priority Sector Advances : consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organisations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.

Promissory Note : Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.

Provisioning : Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification . and make appropriate provisions for likely losses in their balance sheets.

Public Sector Bank : A bank fully or partly owned by the Government.

Rescheduling of Payment : Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.

Restrictive Endorsement : Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.

Right of Appropriation : As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.

Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.

Safe Custody : When articles of value like jewellery, boxes, shares, debentures, Government bonds, Wills or other documents or articles are given to a bank for safe keeping in its safe vault,it is called safe custody.. Bank charges a fee from its clients for such safe custody.

Savings Bank Account : All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account.

Teller : Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.

Underwriting : is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.

Universal Banking : When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.

Virtual Banking : Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's world wide web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.

Wholesale Banking : Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients. 
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Important banking terms



Ad valorem tax:(in Latin: to the value added) - a tax based on the value (or assessed value) of property. Ad valorem tax can also be levied on imported items.

Aggregate demand is the sum of all demand in an economy. This can be computed by adding the expenditure on consumer goods and services, investment, and not exports (total exports minus total imports).


Aggregate supply is the total value of the goods and services produced in a country, plus the value of imported goods less the value of exports.

Alternative minimum tax: An IRS mechanism created to ensure that high-income individuals, corporations, trusts, and estates pay at least some minimum amount of tax, regardless of deductions, credits or exemptions. Alternative minimum tax operates by adding certain tax-preference items back into adjusted gross income. While it was once only important for a small number of high-income individuals who made extensive use of tax shelters and deductions, more and more people are being affected by it. The AMT is triggered when there are large numbers of personal exemptions on state and local taxes paid, large numbers of miscellaneous itemized deductions or medical expenses, or by Incentive Stock Option (ISO) plans.

Average propensity to consume is the proportion of income the average family spends on goods and services.

Average propensity to save is the proportion of income the average family saves (does not spend on consumption).

Average total cost is the sum of all the production costs divided by the number of units produced. See also average cost. Asymmetric Information is where one party in a transaction has less information than the other.
Balance of Payment is the summation of imports and exports made between one countries and the other countries that it trades with.

Balance of trade: The difference in value over a period of time between a country's imports and exports.

Barter system: System where there is an exchange of goods without involving money.

Base year: In the construction of an index, the year from which the weights assigned to the different components of the index is drawn. It is conventional to set the value of an index in its base year equal to 100.

Bear: An investor with a pessimistic market outlook; an investor who expects prices to fall and so sells now in order to buy later at a lower price. A Bear Market is one which is trending downwards or losing value.

Bid price: The highest price an investor is willing to pay for a stock.

Bill of exchange: A written, dated, and signed three-party instrument containing an unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on demand or at a specified future date. Also known as a draft. It is the most commonly used financial instrument in international trade.

Birth rate: The number of births in a year per 1,000 population.

Bond: A certificate of debt (usually interest-bearing or discounted) that is issued by a government or corporation in order to raise money; the bond issuer is required to pay a fixed sum annually until maturity and then a fixed sum to repay the principal. Bonds guide.


Boom: A state of economic prosperity, as in boom times.

Break even: This is a term used to describe a point at which revenues equal costs (fixed and variable).

Bretton Woods: An international monetary system operating from 1946-1973. The value of the dollar was fixed in terms of gold, and every other country held its currency at a fixed exchange rate against the dollar; when trade deficits occurred, the central bank of the deficit country financed the deficit with its reserves of international currencies. The Bretton Woods system collapsed in 1971 when the US abandoned the gold standard.

Budget: A summary of intended expenditures along with proposals for how to meet them. A budget can provide guidelines for managing future investments and expenses. The budget deficit is the amount by which government spending exceeds government revenues during a specified period of time usually a year.


Bull: An investor with an optimistic market outlook; an investor who expects prices to rise and so buys now for resale later. A Bull Market is one in which prices are rising. c.i.f., abbrev: Cost, Insurance and Freight: Export term in which the price quoted by the exporter includes the costs of ocean transportation to the port of destination and insurance coverage.

Call money: Price paid by an investor for a call option. There is no fixed rate for call money. It depends on the type of stock, its performance prior to the purchase of the call option, and the period of the contract. It is an interest bearing band deposits that can be withdrawn on 24 hours notice.

Capital: Wealth in the form of money or property owned by a person or business and human resources of economic value. Capital is the contribution to productive activity made by investment is physical capital (machinery, factories, tools and equipments) and human capital (eg general education, health). Capital is one of the three main factors of production other two are labour and natural resources.

Capital account; Part of a nation's balance of payments that includes purchases and sales of assets, such as stocks, bonds, and land. A nation has a capital account surplus when receipts from asset sales exceed payments for the country's purchases of foreign assets. The sum of the capital and current accounts is the overall balance of payments.

Capital budget: A plan of proposed capital outlays and the means of financing them for the current fiscal period. It is usually a part of the current budget. If a Capital Program is in operation, it will be the first year thereof. A Capital Program is sometimes referred to as a Capital Budget. Capital Asset Pricing Model: A way to show the prices of securities and other risk-free assets.


Capital gains tax: Tax paid on the gain realized upon the sale of an asset. See capital gains tax for examples of tax regimes in various countries. It is a tax on profits from the sale of capital assets, such as shares. A capital loss can be used to offset a capital gain, reducing any tax you would otherwise have to pay.

Cartel: An organization of producers seeking to limit or eliminate competition among its members, most often by agreeing to restrict output to keep prices higher than would occur under competitive conditions. Cartels are inherently unstable because of the potential for producers to defect from the agreement and capture larger markets by selling at lower prices.

Census: Official gathering of information about the population in a particular area. Government departments use the data collected in planning for the future in such areas as health, education, transport, and housing.


Central bank: Major financial institution responsible for issuing currency, managing foreign reserves, implementing monetary policy, and providing banking services to the government and commercial banks.


Centrally planned economy: A planned economic system in which the production, pricing, and distribution of goods and services are determined by the government rather than market forces. Also referred to as a "non market economy." Former Soviet Union, China, and most other communist nations are examples of centrally planed economy Classical economics: The economics of Adam Smith, David Ricardo, Thomas Malthus, and later followers such as John Stuart Mill. The theory concentrated on the functioning of a market economy, spelling out a rudimentary explanation of consumer and producer behaviour in particular markets and postulating that in the long term the economy would tend to operate at full employment because increases in supply would create corresponding increases in demand.

Closed economy: A closed economy is one in which there are no foreign trade transactions or any other form of economic contacts with the rest of the world.

Collateral security: Additional security a borrower supplies to obtain a loan.

Commercial Policy: encompassing instruments of trade protection employed by countries to foster industrial promotion, export diversification, employment creation, and other desired development-oriented strategies. They include tariffs, quotas, and subsidies.

Comparative advantage: The ability to produce a good at a lower cost, relative to other goods, compared to another country. With perfect competition and undistorted markets, countries tend to export goods in which they have a Comparative Advantage and hence make gains from trading

Compound interest: Interest paid on the original principal and on interest accrued from time it became due.
Consumer Surplus is the difference between the price a consumer pays and what they were prepared to pay.

Conditionality: The requirement imposed by the International Monetary Fund that a borrowing country undertake fiscal, monetary, and international commercial reforms as a condition to receiving a loan for balance of payments difficulties.

Copyright: A legal right (usually of the author or composer or publisher of a work) to exclusive publication production, sale, distribution of some work. What is protected by the copyright is the "expression," not the idea. Notice that taking another's idea is plagiarism, so copyrights are not the equivalent of legal prohibition of plagiarism.

Correlation coefficient: Denoted as "r", a measure of the linear relationship between two variables. The absolute value of "r" provides an indication of the strength of the relationship. The value of "r" varies between positive 1 and negative 1, with -1 or 1 indicating a perfect linear relationship, and r = 0 indicating no relationship. The sign of the correlation coefficient indicates whether the slope of the line is positive or negative when the two variables are plotted in a scatter plot.


Cost benefit analysis: A technique that assesses projects through a comparison between their costs and benefits, including social costs and benefits for an entire region or country. Depending on the project objectives and its the expected outputs, three types of CBA are generally recognised: financial; economic; and social. Generally cost-benefit analyses are comparative, i.e. they are used to compare alternative proposals. Cost-benefit analysis compares the costs and benefits of the situation with and without the project; the costs and benefits are considered over the life of the project.

Countervailing duties: duties (tariffs) that are imposed by a country to counteract subsidies provided to a foreign producer
Current account: Part of a nation's balance of payments which includes the value of all goods and services imported and exported, as well as the payment and receipt of dividends and interest. A nation has a current account surplus if exports exceed imports plus net transfers to foreigners. The sum of the current and capital accounts is the overall balance of payments.

Cross elasticity of demand: The change in the quantity demanded of one product or service impacting the change in demand for another product or service. E.g. percentage change in the quantity demanded of a good divided by the percentage change in the price of another good (a substitute or complement)

Crowding out: The possible tendency for government spending on goods and services to put upward pressure on interest rates, thereby discouraging private investment spending.

Currency appreciation: An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates; a unit of one currency buys more units of another currency. Opposite is the case with currency depreciation.

Currency board: Form of central bank that issues domestic currency for foreign exchange at fixed rates.

Currency substitution: The use of foreign currency (e.g., U.S. dollars) as a medium of exchange in place of or along with the local currency (e.g., Rupees).

Customs duty: Duty levied on the imports of certain goods. Includes excise equivalents Unlike tariffs customs duties are used mainly as a means to raise revenue for the government rather than protecting domestic producers from foreign competition.

Death rate: numbers of people dying per thousand population.

Deflation: Deflation is a reduction in the level of national income and output, usually accompanied by a fall in the general price level.
What is depreciation/ Developed country is an economically advanced country whose economy is characterized by a large industrial and service sector and high levels of income per head.

Developing country, less developed country, underdeveloped country or third world country: a country characterized by low levels of GDP and per capita income; typically dominated by agriculture and mineral products and majority of the population lives near subsistence levels.
Dumping occurs when goods are exported at a price less than their normal value, generally meaning they are exported for less than they are sold in the domestic market or third country markets, or at less than production cost.

Direct investment: Foreign capital inflow in the form of investment by foreign-based companies into domestic based companies. Portfolio investment is foreign capital inflow by foreign investors into shares and financial securities. It is the ownership and management of production and/or marketing facilities in a foreign country.

Direct tax: A tax that you pay directly, as opposed to indirect taxes, such as tariffs and business taxes. The income tax is a direct tax, as are property taxes. See also Indirect Tax.

Double taxation: Corporate earnings taxed at both the corporate level and again as a stockholder dividend
Economic growth: Quantitative measure of the change in size/volume of economic activity, usually calculated in terms of gross national product (GNP) or gross domestic product(GDP).

Duopoly: A market structure in which two producers of a commodity compete with each other.

Econometrics: The application of statistical and mathematical methods in the field of economics to test and quantify economic theories and the solutions to economic problems.

Economic development: The process of improving the quality of human life through increasing per capita income, reducing poverty, and enhancing individual economic opportunities. It is also sometimes defined to include better education, improved health and nutrition, conservation of natural resources, a cleaner environment, and a richer cultural life.

Economic growth: An increase in the nation's capacity to produce goods and services.

Economic infrastructure: The underlying amount of physical and financial capital embodied in roads, railways, waterways, airways, and other forms of transportation and communication plus water supplies, financial institutions, electricity, and public services such as health and education. The level of infrastructural development in a country is a crucial factor determining the pace and diversity of economic development.

Economic integration: The merging to various degrees of the economies and economic policies of two or more countries in a given region. See also common market, customs union, free-trade area, trade creation, and trade diversion.

Economic policy: A statement of objectives and the methods of achieving these objectives (policy instruments) by government, political party, business concern, etc. Some examples of government economic objectives are maintaining full employment, achieving a high rate of economic growth, reducing income inequalities and regional development inequalities, and maintaining price stability. Policy instruments include fiscal policy, monetary and financial policy, and legislative controls (e.g., price and wage control, rent control).
Economies of Scale.

Elasticity of demand: The degree to which consumer demand for a product or service responds to a change in price, wage or other independent variable. When there is no perceptible response, demand is said to be inelastic.

Excess capacity: Volume or capacity over and above that which is needed to meet peak planned or expected demand.

Excess demand: the situation in which the quantity demanded at a given price exceeds the quantity supplied. Opposite: excess supply

Exchange control: A governmental policy designed to restrict the outflow of domestic currency and prevent a worsened balance of payments position by controlling the amount of foreign exchange that can be obtained or held by domestic citizens. Often results from overvalued exchange rates


Exchange rate: The price of one currency stated in terms of another currency, when exchanged.

Export incentives: Public subsidies, tax rebates, and other kinds of financial and nonfinancial measures designed to promote a greater level of economic activity in export industries.

Exports: The value of all goods and nonfactor services sold to the rest of the world; they include merchandise, freight, insurance, travel, and other nonfactor services. The value of factor services (such as investment receipts and workers' remittances from abroad) is excluded from this measure. See also merchandise exports and imports.

Externalities: A cost or benefit not accounted for in the price of goods or services. Often "externality" refers to the cost of pollution and other environmental impacts.

Fiscal deficit is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. The fiscal deficit represents the total amount of borrowed funds required by the government to completely meet its expenditure

Fiscal policy is the use of government expenditure and taxation to try to influence the level of economic activity. An expansionary (or reflationary) fiscal policy could mean: cutting levels of direct or indirect tax increasing government expenditure The effect of these policies would be to encourage more spending and boost the economy. A contractionary (or deflationary) fiscal policy could be: increasing taxation - either direct or indirect cutting government expenditure These policies would reduce the level of demand in the economy and help to reduce inflation

Fixed costs: A cost incurred in the general operations of the business that is not directly attributable to the costs of producing goods and services. These "Fixed" or "Indirect" costs of doing business will be incurred whether or not any sales are made during the period, thus the designation "Fixed", as opposed to "Variable".

Fixed exchange rate: The exchange value of a national currency fixed in relation to another (usually the U.S. dollar), not free to fluctuate on the international money market.

Foreign aid The international transfer of public funds in the form of loans or grants either directly from one government to another (bilateral assistance) or indirectly through the vehicle of a multilateral assistance agency like the World Bank. See also tied aid, private foreign investment, and nongovernmental organizations.

Foreign direct investment (FDI): Overseas investments by private multinational corporations.

Foreign exchange reserves: The stock of liquid assets denominated in foreign currencies held by a government's monetary authorities (typically, the finance ministry or central bank). Reserves enable the monetary authorities to intervene in foreign exchange markets to affect the exchange value of their domestic currency in the market. Reserves are invested in low-risk and liquid assets, often in foreign government securities.

Free trade: Free trade in which goods can be imported and exported without any barriers in the forms of tariffs, quotas, or other restrictions. Free trade has often been described as an engine of growth because it encourages countries to specialize in activities in which they have comparative advantages, thereby increasing their respective production efficiencies and hence their total output of goods and services.

Free-trade area A form of economic integration in which there exists free internal trade among member countries but each member is free to levy different external tariffs against non-member nations.

Free-market exchange rate Rate determined solely by international supply and demand for domestic currency expressed in terms of, say, U.S. dollars.

Fringe benefit: A benefit in addition to salary offered to employees such as use of company's car, house, lunch coupons, health care subscriptions etc.

Gains from trade The addition to output and consumption resulting from specialization in production and free trade with other economic units including persons, regions, or countries.

General Agreement on Tariffs and Trade (GATT) An international body set up in 1947 to probe into the ways and means of reducing tariffs on internationally traded goods and services. Between 1947 and 1962, GATT held seven conferences but met with only moderate success. Its major success was achieved in 1967 during the so-called Kennedy Round of talks when tariffs on primary commodities were drastically slashed and then in 1994 with the signing of the Uruguay Round agreement. Replaced in 1995 by World Trade Organization (WTO).

Global warming Theory that world climate is slowly warming as a result of both MDC and LDC industrial and agricultural activities.

Gross domestic product (GDP): Gross Domestic Product: The total of goods and services produced by a nation over a given period, usually 1 year. Gross Domestic Product measures the total output from all the resources located in a country, wherever the owners of the resources live.

Gross national product (GNP) is the value of all final goods and services produced within a nation in a given year, plus income earned by its citizens abroad, minus income earned by foreigners from domestic production. The Fact book, following current practice, uses GDP rather than GNP to measure national production. However, the user must realize that in certain countries net remittances from citizens working abroad may be important to national well being. GNP equals GDP plus net property income from abroad.
Globalisation or Globalization: The process whereby trade is now being conducted on ever widening geographical boundaries. Countries now trade across continents and companies also trade all over the world.


Human capital Productive investments embodied in human persons. These include skills, abilities, ideals, and health resulting from expenditures on education, on-the-job training programs, and medical care.

Imperfect competition: A market situation or structure in which producers have some degree of control over the price of their product. Examples include monopoly and oligopoly. See also perfect competition.

Imperfect market A market where the theoretical assumptions of perfect competition are violated by the existence of, for example, a small number of buyers and sellers, barriers to entry, nonhomogeneity of products, and incomplete information. The three imperfect markets commonly analyzed in economic theory are monopoly, oligopoly, and monopolistic competition.

Import substitution A deliberate effort to replace major consumer imports by promoting the emergence and expansion of domestic industries such as textiles, shoes, and household appliances. Import substitution requires the imposition of protective tariffs and quotas to get the new industry started.

Income inequality The existence of disproportionate distribution of total national income among households whereby the share going to rich persons in a country is far greater than that going to poorer persons (a situation common to most LDCs). This is largely due to differences in the amount of income derived from ownership of property and to a lesser extent the result of differences in earned income. Inequality of personal incomes can be reduced by progressive income taxes and wealth taxes. This is measured by the Gini coefficient.

Index of industrial production: A quantity index that is designed to measure changes in the physical volume or production levels of industrial goods over time.

Inflation is the percentage increase in the prices of goods and services.

Indirect tax: A tax you do not pay directly, but which is passed on to you by an increase in your expenses. For instance, a company might have to pay a fuel tax. The company pays the tax but can increase the cost of its products so consumers are actually paying the tax indirectly by paying more for the merchandise.

Interdependence Interrelationship between economic and noneconomic variables. Also, in international affairs, the situation in which one nation's welfare depends to varying degrees on the decisions and policies of another nation, and vice versa. See also dependence.

International commodity agreement Formal agreement by sellers of a common internationally traded commodity (coffee, sugar) to coordinate supply to maintain price stability.

International Labor Organization (ILO) One of the functional organizations of the United Nations, based in Geneva, Switzerland, whose central task is to look into problems of world labor supply, its training, utilization, domestic and international distribution, etc. Its aim in this endeavor is to increase world output through maximum utilization of available human resources and thus improve levels of living.

International Monetary Fund (IMF) An autonomous international financial institution that originated in the Bretton Woods Conference of 1944. Its main purpose is to regulate the international monetary exchange system, which also stems from that conference but has since been modified. In particular, one of the central tasks of the IMF is to control fluctuations in exchange rates of world currencies in a bid to alleviate severe balance of payments problems.

International poverty line An arbitrary international real income measure, usually expressed in constant dollars (e.g., $270), used as a basis for estimating the proportion of the world's population that exists at bare levels of subsistence.

Land reform A deliberate attempt to reorganize and transform existing agrarian systems with the intention of improving the distribution of agricultural incomes and thus fostering rural development. Among its many forms, land reform may entail provision of secured tenure rights to the individual farmer, transfer of land ownership away from small classes of powerful landowners to tenants who actually till the land, appropriation of land estates for establishing small new settlement farms, or instituting land improvements and irrigation schemes.

Macroeconomic stabilization Policies designed to eliminate macroeconomic instability.

Macroeconomics: The branch of economics that considers the relationships among broad economic aggregates such as national income, total volumes of saving, investment, consumption expenditure, employment, and money supply. It is also concerned with determinants of the magnitudes of these aggregates and their rates of change over time.

Market economy: A free private-enterprise economy governed by consumer sovereignty, a price system, and the forces of supply and demand.

Market failure: A phenomenon that results from the existence of market imperfections (e.g., monopoly power, lack of factor mobility, significant externalities, lack of knowledge) that weaken the functioning of a free-market economy--it fails to realize its theoretical beneficial results. Market failure often provides the justification for government interference with the working of the free market.

Market-friendly approach: World Bank notion that successful development policy requires governments to create an environment in which markets can operate efficiently and to intervene selectively in the economy in areas where the market is inefficient (e.g., social and economic infrastructure, investment coordination, economic "safety net").

Market mechanism: The system whereby prices of stocks & shares, commodities or services freely rise or fall when the buyer's demand for them rises or falls or the seller's supply of them decreases or increases.

Market prices: Prices established by demand and supply in a free-market economy.

Merchandise exports and imports: All international changes in ownership of merchandise passing across the customs borders of the trading countries. Exports are valued f.o.b. (free on board). Imports are valued c.i.f. (cost, insurance, and freight).

Merchandise trade balance: Balance on commodity exports and imports.

Microeconomics: The branch of economics concerned with individual decision units--firms and households--and the way in which their decisions interact to determine relative prices of goods and factors of production and how much of these will be bought and sold. The market is the central concept in microeconomics.

Middle-income countries (MICs): LDCs with per capita income above $785 and below $9,655 in 1997 according to World Bank measures.

Mixed economic systems: Economic systems that are a mixture of both capitalist and socialist economies. Most developing countries have mixed systems. Their essential feature is the coexistence of substantial private and public activity within a single economy.

Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize currency. If the economy is heating up, the central bank (such as RBI in India) can withdraw money from the banking system, raise the reserve requirement or raise the discount rate to make it cool down. If growth is slowing, it can reverse the process - increase the money supply, lower the reserve requirement and decrease the discount rate. The monetary policy influences interest rates and money supply.

Money supply: the total stock of money in the economy; currency held by the public plus money in accounts in banks. It consists primarily currency in circulation and deposits in savings and checking accounts. Too much money in relation to the output of goods tends to push interest rates down and push inflation up; too little money tends to push rates up and prices down, causing unemployment and idle plant capacity. The central bank manages the money supply by raising and lowering the reserves banks are required to hold and the discount rate at which they can borrow money from the central bank. The central bank also trades government securities (called repurchase agreements) to take money out of the system or put it in. There are various measures of money supply, including M1, M2, M3 and L; these are referred to as monetary aggregates.

Monopoly: A market situation in which a product that does not have close substitutes is being produced and sold by a single seller. See also monopsony.

Multi-Fiber Arrangement (MFA) A set of nontariff bilateral quotas established by developed countries on imports of cotton, wool, and synthetic textiles and clothing from individual LDCs

Multinational corporation (MNC) An international or transnational corporation with headquarters in one country but branch offices in a wide range of both developed and developing countries. Examples include General Motors, Coca-Cola, Firestone, Philips, Volkswagen, British Petroleum, Exxon, and ITT. Firms become multinational corporations when they perceive advantages to establishing production and other activities in foreign locations. Firms globalize their activities both to supply their home-country market more cheaply and to serve foreign markets more directly. Keeping foreign activities within the corporate structure lets firms avoid the costs inherent in arm's-length dealings with separate entities while utilizing their own firm-specific knowledge such as advanced production techniques.

National debt: Treasury bills, notes, bonds, and other debt obligations that constitute the debt owed by the federal government. It represents the accumulation of each year's budget deficit
Public debt: Borrowing by the Government of India internally as well as externally. The total of the nation's debts: debts of local and state and national governments is an indicator of how much public spending is financed by borrowing instead of taxation

Newly industrializing countries (NICs) A small group of countries at a relatively advanced level of economic development with a substantial and dynamic industrial sector and with close links to the international trade, finance, and investment system (Argentina, Brazil, Greece, Mexico, Portugal, Singapore, South Korea, Spain, and Taiwan).

Nongovernmental organizations (NGOs) Privately owned and operated organizations involved in providing financial and technical assistance to LDCs. See foreign aid.

Nontariff trade barrier: A barrier to free trade that takes a form other than a tariff, such as quotas or sanitary requirements for imported meats and dairy products.


Official development assistance (ODA) Net disbursements of loans or grants made on concessional terms by official agencies of member countries of the Organization for Economic Cooperation and Development (OECD).

Official exchange rate: Rate at which the central bank will buy and sell the domestic currency in terms of a foreign currency such as the U.S. dollar.

An Open economy is an economy that encourages foreign trade and has extensive financial and nonfinancial contacts with the rest of the world in areas such as education, culture, and technology. See also closed economy.
The opportunity cost is the implied cost of not doing something that could have led to higher returns.

Organization for Economic Cooperation and Development (OECD):An organization of 20 countries from the Western world including all of those in Europe and North America. Its major objective is to assist the economic growth of its member nations by promoting cooperation and technical analysis of national and international economic trends.

Overvalued exchange rate An official exchange rate set at a level higher than its real or shadow value--for example, 7 Kenyan shillings per dollar instead of, say, 10 shillings per dollar. Overvalued rates cheapen the real cost of imports while raising the real cost of exports. They often lead to a need for exchange control.

Perfect competition: A market situation characterized by the existence of very many buyers and sellers of homogeneous goods or services with perfect knowledge and free entry so that no single buyer or seller can influence the price of the good or service. 

Performance budget is a budget format that relates the input of resources and the output of services for each organizational unit individually. Sometimes used synonymously with program budget. It is a budget wherein expenditures are based primarily upon measurable performance of activities.

Political economy The attempt to merge economic analysis with practical politics--to view economic activity in its political context. Much of classical economics was political economy, and today political economy is increasingly being recognized as necessary for any realistic examination of development problems.

Portfolio investment Financial investments by private individuals, corporations, pension funds, and mutual funds in stocks, bonds, certificates of deposit, and notes issued by private companies and the public agencies of LDCs. See also private foreign investment.

Poverty gap: The sum of the difference between the poverty line and actual income levels of all people living below that line.

Poverty line: A level of income below, which people are deemed poor. A global poverty line of $1 per person per day was suggested in 1990 (World Bank 1990). This line facilitates comparison of how many poor people there are in different countries. But, it is only a crude estimate because the line does not recognize differences in the buying power of money in different countries, and, more significantly, because it does not recognize other aspects of poverty than the material, or income poverty.

Price: The monetary or real value of a resource, commodity, or service. The role of prices in a market economy is to ration or allocate resources in accordance with supply and demand; relative prices should reflect the relative scarcity of different resources, goods, or services.

Price elasticity of demand: The responsiveness of the quantity of a commodity demanded to a change in its price, expressed as the percentage change in quantity demanded divided by the percentage change in price.


Price elasticity of supply: The responsiveness of the quantity of a commodity supplied to a change in its price, expressed as the percentage change in quantity supplied divided by the percentage change in price.

Quota: A quota is a physical limitation on the quantity of any item that can be imported into a country, such as so many automobiles per year. Also a method for allocating limited school places by noncompetitive means--for example, by income or ethnicity.

Repo rate: This is one of the credit management tools used by the Reserve Bank to regulate liquidity in South Africa (customer spending). The bank borrows money from the Reserve Bank to cover its shortfall. The Reserve Bank only makes a certain amount of money available and this determines the repo rate. If the bank requires more money than what is available, this will increase the repo rate - and vice versa.

Revenue expenditure: This is expenditure on recurring items, including the running of services and financing capital spending that is paid for by borrowing. This is meant for normal running of governments' maintenance expenditures, interest payments, subsidies and transfers etc. It is current expenditure which does not result in the creation of assets. Grants given to State governments or other parties are also treated as revenue expenditure even if some of the grants may be meant for creating assets. Subsidy : Financial assistance (often from the government) to a specific group of producers or consumers.

Revenue receipts: Additions to assets that do not incur an obligation that must be met at some future date and do not represent exchanges of property for money. Assets must be available for expenditures. These include proceeds of taxes and duties levied by the government, interest and dividend on investments made by the government, fees and other receipts for services rendered by the government.

Stabilization policies: A coordinated set of mostly restrictive fiscal and monetary policies aimed at reducing inflation, cutting budget deficits, and improving the balance of payments. See conditionality and International Monetary Fund (IMF).

Subsidy: A payment by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are export subsidies to encourage the sale of exports; subsidies on some foodstuffs to keep down the cost of living, especially in urban areas; and farm subsidies to encourage expansion of farm production and achieve self-reliance in food production.

Tax avoidance: A legal action designed to reduce or eliminate the taxes that one owes.

Tax base: the total property and resources subject to taxation. See also tariffs.

Tax evasion: An illegal strategy to decrease tax burden by underreporting income, overstating deductions, or using illegal tax shelters.

Terms of trade The ratio of a country's average export price to its average import price; also known as the commodity terms of trade. A country's terms of trade are said to improve when this ratio increases and to worsen when it decreases, that is, when import prices rise at a relatively faster rate than export prices (the experience of most LDCs in recent decades).

Treasury bill: A short-term debt issued by a national government with a maximum maturity of one year. Treasury bills are sold at discount, such that the difference between purchase price and the value at maturity is the amount of interest.

VAT: A form of indirect sales tax paid on products and services at each stage of production or distribution, based on the value added at that stage and included in the cost to the ultimate customer.

World Bank: An international financial institution owned by its 181 member countries and based in Washington, D.C. Its main objective is to provide development funds to the Third World nations in the form of interest-bearing loans and technical assistance. The World Bank operates with borrowed funds.

WTO: The World Trade Organization is a global international organization dealing with the rules of trade between nations. It was set up in 1995 at the conclusion of GATT negotiations for administering multilateral trade negotiations.

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