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Banking Awareness for SBI PO and Clerk

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www.BankExamsToday.com

Banking

AwarenessFor SBI, IBPS and other Govt exams

Ramandeep Singh

B.com (PU), MBA (PAU)



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Functions of Banks

Primary Functions

Accepting deposits

Most important function of a bank is to mobilize public funds. Bank provides safe

custody as well as interest to the depositors.

Saving deposit

Saving deposit account meant for those people who wants to save for future needs

and uncertainties. There is no restriction on number and amount of withdrawals.

Bank provides cheque book, ATM cum debit card and Internet banking facility.




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Depositors need to maintain minimum balance which varies across different

banks.

Fixed deposit or Term deposit

In fixed deposit account, money is deposited for a fixed tenure. Banks issues a

deposit certificate which contains name, address, deposit amount, withdrawal

date, depositor signatures and other important information.

Depositor can't withdraw money during this period. In case depositor want to

withdraw before maturity, banks levy pre-mature withdrawal penalty.

Current account

Current accounts are normally opened by businesses. Banks provide overdraft

facility for these accounts by which account holder can withdraw more money

than available bank balance. This act as a short term loan to meet urgent needs.

Bank charges high rate on interest and charges for overdraft facility because bank

need to maintain a reserve for unknown demands for overdraft.

Recurring deposit

In this type of account depositors deposits certain sum of money at regular periodof time. Benefit of recurring account is that it provides benefit of compounded

rate of interest and enables depositors to collect big sum of money.

Granting Loans and advances

Cash credit

It is a short term loan facility under which banks allows its customers to take loan

up to a certain limit, normally bank grants this loan against mortgage of certain

property.

Bank overdraft

Bank provides this facility to current account holders.Account holder can

withdraw money anytime up to the provided limit. He need to pay interest only on

borrowed amount for the period for which he took loan.



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Loans

Banks providing loans for various kinds of short term as well as long term needs.

Borrower pay back the loan in installments.

Discounting bills

In normal day to day business, sellers sends bills to buyer whenever they sell their

products and it is mentioned in bill to make payment in stipulated time. Lets take

it 30 days. In such conditions seller may discount the bill from bank for some

fees. In such situation bill discounting acts as short term loan. In case the buyer or

the drawer defaults, bank send the bill back to seller to drawer so that he may take

legal action against drawee or buyer.

Secondary functions

Agency functions




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• Funds transfer

• Cheques collection

• Periodic payments/collection

• Portfolio management

Utility functions

• Issue of draft, letter of credit etc :-Letter of credit acts as an assurance

that in case the borrower defaults in making the payment, bank will make

the payment up to the amount mentioned in letter of credit

• Locker facility

• Underwriting of shares

• Dealing in foreign exchanges

• Project reports

• Social welfare programs



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What is an NRE account?

NRE Account stands for Non-Resident (External) Account.

The NRE account can be opened by Non-Resident Indians (NRIs). The account

can be operated individually or jointly. Persons of Indian Origin are also eligible

for the account. In case of NRE accounts, nomination can be made for NRI or

PIO resident only.

The NRE account gives an opportunity to non-resident Indians to deposit money

in Indian Banks.

There could be multiple type of accounts under NRE. These include: Saving

Fund, Current Account , Recurring Deposit, or Term Deposit. The funds under

NRE are maintained in Indian Rupees as the currency.

The fund amount including the principal as well as the interest can be repatriated.

This facility may not be there in other accounts for NRIs. The repatriation could

be in foreign currencies.

The deposits under the NRE accounts are not taxable under Wealth Tax. Also, the

interest income is exempt from the income-tax.

While the NRE accounts are accessible only to NRI and PIO there might be some

special cases. NRIs who return to India for permanent settlement may hold the

account till maturity of their deposits.




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What are BASEL-III norms and why

are they important for India?

"Basel III" is a name given to reform measures for the Banking sector. It was

developed by the Basel Committee, hence the name. The measures are to

strengthen the regulation, supervision and risk management of the banking sector.

Aims of BASEL-III norms:

• create an ability to absorb financial and economic shocks

• Improve risk management and governance

• Strengthen banks' transparency and disclosures

The reforms are targeted at the individual banks and banking institutions. It is also

aimed at reducing the system-wide risks.

The norms have received a positive appreciation in India. The Reserve Bank of

India (RBI) Governor, D. Subbarao in an interview to a newspaper mentioned that

BASEL-III norms would strengthen Indian banks.

The BASEL-III norms have provided important guidelines for Liquidity and

Capital. There are three important pillars defined for Capital.

Pillar – I

• Capital

• Risk Coverage

• Containing Leverage



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Pillar-II

• Risk Management and Supervision

Pillar-III

• Market Discipline

In order to meet the BASEL-III requirements, Indian banks would have to raise a

lot of external capital. While the norms would strengthen the robustness of banks

against risks, it will also have some effect on the profitability in the short run. The

norms would increase the cost of capital for the banks and have an adverse effect

on the reqturn on equity in the short run.




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What are Special Economic Zones (SEZ)

in India?

Special Economic Zone (SEZ) is an area where economic laws are more relaxed

than a country's typical or national laws. In India SEZs have been developed to

promote exports.

The Special Economic Zones (SEZs) Policy was announced in April 2000.

The Special Economic Zones Act, 2005, was passed by the Parliament in 2005.

The SEZ act came into effect in 2006.

The main objectives of the SEZ Act are:

(a) generation of additional economic activity

(b) promotion of exports of goods and services

(c) promotion of investment from domestic and foreign sources

(d) creation of employment opportunities

(e) development of infrastructure facilities

The major incentives and facilities available to SEZ developers include:-

Exemption from customs/excise duties for development of SEZs for authorized

operations approved by the BOA.

Income Tax exemption on income derived from the business of development of

the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income

Tax Act.

Exemption from minimum alternate tax under Section 115 JB of the Income Tax

Act.

Exemption from dividend distribution tax under Section 115O of the Income Tax

Act.



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Exemption from Central Sales Tax (CST).

Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ

Act).




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Central Government Welfare

SchemesAam Aadmi Bima Yojna

Started - 02-10-2007

Objective - To provide life and accident insurance to people without land living

in rural areas

Working - Both State government and National government contributes Rs 200each towards insurance one family member of age 18-59.

Money paid to insurance beneficiary

• In case of natural death - Rs 30,000

• In case death due to accident or permanent disability - Rs 75,000

• In case of permanent disability due to any accident - Rs 37,500

Doodh Ganga

Goal - Provide interest free loan and capital subsidies to diary farmers

Indira Awaaz Yojna

Started - 1985

Objective - Prociding financial assistance to rural and urban poor for construction

of houses

Working - Financial assistance of Rs 70,000 in plain areas and Rs 75,000 in

difficult areas is provided.



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• Construction of sanitary latrine and smokeless chullah is mandatory

• Hiring a contractor is banned

• House is allotted in the name of woman or jointly in the name of both man

and woman.

Prefernce is given to

• Mentally challenge

• Physical challenged

•

Woman headed houses

• Transgenders

• Widows and children of members of defence or police forces who died on

duty

Janani Suraksha Yojana

Started - 12 April 2005

Objective - JSY aims at reducing maternal deaths by promoting deliveries in

public and private health institutions

Working - Mother should be at least 19 year old and belong to BPL or SC/ST

category.

Government provides

• Rs 500 in case of home delivery

• Rs 600 in case of mother from municipal/corporation area delivering baby

in private or public health care center

• Rs 700 in case of mother from rural area delivering baby in private or

public health care center




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Ladli Scheme

Started - 20 August 2008

Aim- Objective of this scheme was to raise the status of girl child and change thesocial mindset of people towards girls in Haryana. (Separate scheme for Delhi)

Working - Financial assistance of Rs 5000 per family per year is given by state

government on the birth of second girl child. This scheme is available for parents

who are domiciles of Haryana.

Ladli Laxmi Yojna

Aim- Objective of this scheme was to raise the status of girl child and change the

social mindset of people towards girls in Madhya Pradesh.

Working - Government purchases National saving certificate worth Rs 6000 per

year for four years for every girl child born after 01-04-2008 and whose parents

are domicile of Madhya Pradesh.

Additional money paid on following events :-

• At the time of admission in 4th standard - Rs 2000

• At the time of admission in 9th standard - Rs 4000

• At the time of admission 11th standard - Rs 7500

• During higher secondary education - Rs 200 each month

• On the completion of 21 years she could receive even Rs 1 lac

Mahatma Gandhi National Rural Employment Guarantee Act

Started - 25 August 2005

Objective - To provide 100 days employment guarantee per year to unskilled

labourers

Working - Government provides 100 days employment guarantee per year to

unskilled labourer to do public works for which he is paid Rs 120 per day. In case

Government is unable to provide employment to labourers then it need pay



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labourers for 100 days at their home.

Budget aloocated for MNREGA - Rs 45000 crores ( 2012-2013)

Midday Meal Scheme

Started - Started on different dates in various states in India. It was first

introduced in Uttar Pradesh

Objectives - Providing free lunch on working days to primary and upper primary

students of government schools in India. This scheme aims at promoting

education and removal malnutrition in children.

National Pension Scheme India

Started - 1 January 2004

Objectives - Provides social security to Government employees on retirement

Working - 10% of basic salary is deducted from basic salary and DA and

contributed to pension fund. Central government makes equal contribution to the

fund.

Pradhan Mantri Gram Sadak Yojana

Started - 5 December 2000

Objective - To provide roads in villages with population of 1000+

Rashtriya Krishi Vikas Yojana

Started - August 2007

Objective - This scheme aims at achieving 4% annual growth in agriculture

sector.

Working - Rs 5875 crores will be in agricultural sector in 11th five year plan to

improve agricultural productivity.




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Rashtriya Swasthya Bima Yojana

Started - April 1, 2008

Objective - Providing health insurance to poor people living below poverty lineand holding yellow card

Working - Anybody holding yellow card need to register for this scheme and get

a smart card. Family get insurance of Rs 30,000 per family. This is cashless

facility to get treatment in public as well as private hospitals.

Sampoorna Grameen Rozgar Yojana

Started - 25 September 2001

Aim - Started by cobining two ongoing schemes namely Jawahar Gram Smridhi

Yojana and employment Assurance Scheme. This scheme was started to provide

supplementary employment so that labourers in rural areas can earn extra and thus

providing food security to them.

Working - Budget of Rs 10,000 crores has been alloted which is to be provided in

ratio of ratio of 75:25 by Center and State and government.

Sarva Shiksha Abhiyan

Started - 2001

Aim - Provide useful and free education to children in the age group of 6 -14

years under RTE act 2009

Funds allocated - Rs 61,734 crores allocated in 2011-12

Swabhiman

Started - 10 February 2011

Aim - To provide banking facilitates in rural areas with banking services. Goal of

this scheme is to start banking services in 20,000 villages without banking



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services with a population of 2000 by March 2012

Swarnajayanti Gram Swarozgar YojanaStarted - 1 April 1999

Objective - SGSY provide assistance to rural people living below poverty line to

take up self employment.

Swavalamban

Started - 2010 (Will be closed on 2017-2017)Goal - To encourage workers working in unorganized sector to save for their

retirement

Working - Workers must invest contribute minimum Rs.1000 to maximum

Rs.12000 per year into their NPS account. Government will contribute Rs 1000

per year to NPS account per year.




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Current RBI Policy & Reserve Rates:-

Repo Rate 8% (Unchanged)

Reverse Repo 7% (Unchanged)

CRR 4% (Unchanged)

SLR 23% (Unchanged)

MSF 9% (Unchanged)

Bank Rate 9% (Unchanged)

Repo Rate

Repo rate or repurchase rate is the rate at which banks borrow money from the

central bank (RBI for India) for a short period by selling their securities (financial

assets) to the central bank with an agreement to repurchase it at a future date at

predetermined price. It is similar to borrowing money from a money-lender byselling him something, and later buying it back at a pre-fixed price.

Bank Rate

People often get confused between Bank Rate and Repo Rate. Though they

appear similar there is a fundamental difference between them.

Unlike Repo Rate, there is no sale of security in Bank Rate. Bank rate is the rate

at which banks borrow money from the central bank without any sale of securities. It is generally for a longer period of time. This is similar to borrowing

money from someone and paying interest on that amount.

Both these rates are determined by the central bank of the country based on the

demand and supply of money in the economy.



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Reverse Repo Rate

Reverse Repo rate is the rate of interest at which the central bank (RBI) borrows

funds from other banks for a short duration. The banks deposit their short termexcess funds with the central bank and earn interest on it.

Reverse Repo Rate is used by the central bank to absorb liquidity from the

economy. When it feels that there is too much money floating in the market, it

increases the reverse repo rate, which means that banks earn higher rate of interest

when they deposit money with the central bank.

Reverse Report rate was an independent rate till 03/05/2011. However, in the

monetary policy announced on 03/05/2011, RBI decided to link it to Repo rate.

So, Reverse Repo Rate is now always 100 bps below the Repo rate (till RBI

decides to delink the same).

CRR (Cash Reserve Ratio)

Have you ever wondered what happens to the amount that you deposit in bank? It

is used by banks to earn money by investing or lending it to others (house loans,

personal loans etc.). But as per the regulations, banks cannot use the entire

amount deposited with them for this purpose. They are required to maintain a

percentage of their deposits as cash. So, if you deposit Rs. 100/- in your bank,

then bank can’t use the entire Rs. 100/- for lending or investment purpose. They

have to maintain a portion of the deposit as cash and can use only the remaining

amount for lending/investment. This minimum percentage, which is determined

by the central bank, is known as Cash Reserve Ratio.

So if CRR is 6% then it means for every Rs. 100/- deposited in the bank, it has to

maintain a minimum of Rs. 6/- as cash. However, banks do not keep this cash

with them, but are required to deposit it with the central bank, so that it can help

them with cash at the time of need.




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SLR (Statutory Liquidity Ratio)

Apart from keeping a portion of deposits with the RBI as cash, banks are also

required to maintain a minimum percentage of deposits with them at the end of

every business day, in the form of gold, cash, government bonds or other

approved securities. This minimum percentage is called Statutory Liquidity Ratio.

Example

If you deposit Rs. 100/- in a bank, and assuming CRR to be 6% and SLR to be

8%, the bank can use 100-6-8= Rs. 86/- for giving loan or for investment purpose.



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Interim Budget 2014-15 Highlights

The government's term ends in May and the measure wasnecessary to cover expenditure until a national election iscompleted and a new administration installed.

Chidambaram said India's economy, the 11th largest in theworld, had stabilised an

d was showing signs of turnaround. Hisspeech was marred by protests over the pr

oposed division of asouthern state.

GROWTH

* GDP expansion in third and fourth quarters of 2013/14estimated at 5.2 percent.Growth for the whole year expected at4.9 percent.

FISCAL DEFICIT

* Fiscal deficit seen at 4.6 percent of GDP in 2013/14, belowtarget of 4.8 percent.

* Fiscal deficit projected at 4.1 percent of GDP in 2014/15

* Says need to bring down the deficit to 3 percent of GDP by 2016/17

CURRENT ACCOUNT DEFICIT

* Current account deficit for 2013/14 estimated at $45 billion from last fiscal year'

s $88billion.

* Forex reserves to rise by $15 billion by end of 2013/14

BORROWING/DEBT SERVICING

* Gross market borrowing for 2014/15 seen at 5.97 trillion rupees, net market borr

owing at4.57 trillion rupees.

* Government plans to buy back/switch bonds of 500 billion rupees in 2014/15.

* Ways and Means advances for 2014/15 estimated at 100 billion rupees

* Debt repayment in 2014/15 seen at 1.397 trillion rupees




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* Interest payments seen rising to 4.27 trillion rupees in 2014/15 from a revised es

timate of3.8 trillion rupees for the current fiscal year.

PRIVATISATION

* Target from stake sale in state run firms for 2013/14 revised to 258.41 billion ru

pees

* Target for 2014/15 increased to 569.25 billion rupees

SPENDING

* Plan expenditure for 2014/15 seen at 5.55 trillion rupees, the same level as the previousfiscal year

* Non plan spending estimated at about 12.08 trillion rupees in 2014/15

SUBSIDIES

* Total spending on food, fertilisers and fuel at 2.5 trillion rupees in 2014/15

* Food subsidy estimated at 1.15 trillion rupees, fertiliser subsidy at 679.71 billio

n rupees.Petroleum subsidy seen at 634.27 billion rupees versus revised figure of

854.8 billion rupeesfor 2013/14.

DEFENCE

* Spending raised to 2.24 trillion rupees in 2014/15, up 10 percent year on year.

EXPORTS

* Merchandise exports seen at $326 billion in 2013/14, up 6.3 percent year on yea

r.

* Agriculture exports expected to touch $45 billion in 2013/14, up from $41 billio

n in2012/13

TAX PROPOSALS

* No major change in tax rates



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* Factory gate tax to be reduced to 10 percent from 12 percent on some capital go

ods,consumer durables

* Cut excise duty on small cars, two wheelers, commercial vehicles to 8 percent from 12percent

* Recommends excise duty reductions on larger vehicles

* Restructure of factory gate tax for mobile handsets

BANKS RESTRUCTURING

* Govt to provide 112 billion rupees capital infusion in state run banks in 2014/15

* Propose to set up public debt management office to start5 work from 2014/15

FINANCE MINISTER COMMENTS

Resurgence in exports, global economic revival and moderation in inflation point

to betteroutlook for Indian economy in 2014/15.

"I can confidently assert that the economy is more stable today than what it was t

wo yearsago. The fiscal deficit is declining, the current account deficit has been constrained, inflationhas moderated, the quarterly growth rate is on the rise, the exc

hange rate is stable, exportshave increased and hundreds of projects have been un

blocked."

India's economy now the 11th largest in the world, he said.




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India ranking in different Indexes :

1. Global Hunger Index (GHI) - India’s score is 23.7, with a rank of 66th out of

88 countries.

2. Global Peace Index – India’s ranked 141th.

3. Human Development Report UNDP - India at 134 out of 182 countries.

4. GREENDEX , a world wide ranking based on consumer choice and

environment - India Ranked 1st with a Score of 59.5 among 17 countries.

5. Global Corruption Index - India at 94th .

6. WEF The Global Gender Gap Report - India ranked 114 lisetd very poorly on

the economic,

education and health sub- indexes.

7. WEF Global Information Technology Report - India at 54th.

8. the business executives in the Political and

Economic Risk Consultancy (PERC) survey rated India as having the region’s

most inefficient bureaucracy. India scored 9.41 Singapore scored 2.53.

9. Global Competitiveness Index - India at 59th .

10. India ranked at 105 in the Education for All Development Index.



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Bank Slogans

Multinational Bank Slogans

Name of the Bank Punch line

CITI Bank Let's get it done

Standard Chartered Bank Your Right Partner

HSBC Bank The World's Local Bank

Royal Bank of Scotland Make it happen

BNP Paribas The bank for a changing world

JPMorgan Chase Bank The right relationship is everything

Deutsche Bank A passion to perform

Scotia Bank You’re richer than you think

American Express Bank Do more

Barclays Bank Fluent in finance

DBS Bank Living, Breathing Asia

Indian Bank Slogans

Bank Name Bank Slogan

Allahabad Bank A tradition of trust

Andhra Bank Much more to do. With YOU in focus

Bank of Baroda India's International Bank




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Bank of India Relationships beyond Banking

Bank of Maharashtra One Family One Bank

Bank of Rajasthan Together we Prosper

Canara Bank It's easy to change for those who you love, Together we Can

Central Bank of India Build A Better Life Around Us, Central to you since 1911

Corporation Bank Prosperity for all

Dena Bank Trusted Family Bank

Federal Bank Your Perfect Banking Partner

HDFC Bank We Understand Your World

HSBC World’s Local Bank

ICICI Bank "Hum Hai na..."

IDBI Bank Banking for all; "Aao Sochein Bada"

Indian Bank Taking Banking Technology to Common Man, Your Tech-f

Indian Overseas Bank Good people to grow with

J & K Bank Serving to Empower

Karur Vysya Bank Smart way to Bank

Lakshmi Vilas Bank The Changing Face of Prosperity

Oriental Bank of Commerce Where every individual is committed

Punjab and Sindh Bank Where series is a way of life

Punjab National Bank The Name you can Bank Upon



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State Bank of India The Nation banks on us; Pure Banking Nothing Else; With you

State Bank of Hyderabad You can always bank on us

State Bank of Mysore Working for a better tomorrow

State Bank of Patiala Blending Modernity with Tradition

State Bank of Travancore A Long Tradition of Trust

South Indian Bank Experience Next Generation Banking

Syndicate Bank Your Faithful And Friendly Financial Partner

The Economic Times Knowledge is Power

UCO Bank Honors Your Trust

Union Bank of India Good people to bank with

United Bank of India The Bank that begins with “U”

Vijaya Bank A Friend You can Bank Upon

Yes Bank Experience our expertise




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List of PSU Banks and Their Heads

State Bank of India and It’s Associates

Bank name Name of the Head

State Bank of India

Smt. Arundhati BhattacharyaState Bank of Bikaner & Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Travancore

State Bank of Patiala

Other PSU banks

Bank name Name of the Head

Allahabad Bank Rakesh Sethi

Andhra Bank C. V. R. Rajendran

Bank of Baroda S. S. Mundra

Bank of India V. R. Iyer

Bank of Maharashtra Sushil Muhnot

Bharatiya Mahila Bank Usha Anantha Subramaniyan

Canara Bank R. K. Dubey

Central Bank of India Rajeev RishiCorporation Bank Sadhu Ram Bansal

Dena Bank Ashwini Kumar

IDBI Bank Ltd M. S. Raghavan

Indian Bank T. M. Bhasin

Indian Overseas Bank M. Narendra

Oriental Bank of Commerce S. L. Bansal

Punjab & Sindh Bank Jatinder Bir Singh

Punjab National Bank K. R. Kamath

Syndicate Bank Sudhir Kumar JainUCO Bank Arun Kaul

Union Bank of India Arun Tiwari

United Bank of India Vacant

Vijaya Bank V. Kannan



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New Appointments in India 2014

Mr. Narendra Modi : Chairman, Planning Commission.

Mrs. Sumitra Mahajan : Speaker, Lok Sabha.

Mohammad Hamid Ansari : Chairman, Rajya Sabha.

Mr. P. J. Kurien : Deputy Chairman, Rajya Sabha.

Mr. Arun Jaitley : Leader of House (Rajya Sabha).

Mr. Ghulam Nabi Azad : Leader of Opposition (Rajya Sabha).

Dr. Montek Singh Ahluwalia : Deputy Chairman, Planning Commission.

Mr. V. S. Sampath : Chief Election Commissioner

Mr. Harishankar Brahma : Election Commissioner.

Syed Nasim Zaidi : Election Commissioner.

Mr. Shashi Kant Sharma : Comptroller and Auditor-General of India.

Mr. Justice K. G. Balakrishnan : Chairperson, National Human Right

Commission (NHRC)

Mr. Ajit Kumar Seth : Cabinet Secretary.

Mr. Nripendra Misra : Principal Secretary to Prime Minister.

Justice V. Eshwaraiah : Chairman, National Commission for Backward Classes.

Ms. Shanta Sinha : Chairperson, National Commission for Protection of Child

Rights (NCPCR)

Dr. P. L. Punia : Chairman, National Commission for Scheduled Castes

Dr.Rameshwar Oraon : Chairman, National Commission for Scheduled Tribes

(NCST).

Prof. D. P. Agrawal : Chairman, Union Public Service Commission (UPSC).

Dr. M. S. Swaminathan : Chairman, National Commission on Farmers (NCF).

Mr. Ajit Kumar Doval : National Security Adviser and Special Adviser to PM

(Internal Security).

Mr. Sharad Kumar : Director-General, National Investigation Agency (NIA)

Mr. Arunendra Kumar : Chairman, Railway Board.

Mr. Shumsher K. Sheriff : Secretary-General, Rajya Sabha

Mr. T. K. Viswanathan : Secretary-General, Lok Sabha.

Mr. Syed Asif Ibrahim : Director, Intelligence Bureau (IB).

Mr. Ranjit Sinha : Director, Central Bureau of Investigation (CBI).

Mr. Alok Joshi : Director, Research and Analysis Wing (RAW).

Mr. Jayanto Narayan Choudhury : Director-General, National Security Guard




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(NSG).

Mr. Dilip Trivedi : Director-General, CRPF.

Mr. Devendra Kumar Pathak : Director-General, Border Security Force (BSF).

Mr. Arvind Ranjan : Director-General, Central Industrial Security Force (CISF).Mr. P. K. Mehta : Director-General, Railway Protection Force. (RPF)

Mr. Subhas Goswami : Director-General, Indo-Tibetan Border Police (ITBP).

Mr. Arun Chaudhary : Director-General, Sashastra Seema Bal.

Vice-Admiral Anurag G. Thapliyal : Director-General, Indian Coast Guard.

Lt. Gen. Avtar Singh : Director-General, Defence Intelligence Agency.

Prof. Ved Prakash : Chairman, UGC.

Dr. Avinash Chander : Scientific Adviser to Defence Minister and Secretary,

Defence Research and Development Organisation. (DRDO)Dr. R. Chidambaram : Principal Scientific Adviser to the Government.

Mr. K. Radhakrishnan : Chairman, Space Commission and ISRO.

Mr. Ratan Kumar Sinha : Chairman, Atomic Energy Commission and

Secretary, Dept. of Atomic Energy.

Mr. Naseem Ahmad : Chairperson, National Commission for Minorities.

Mr. Rajiv Mathur : Chief Information Commissioner.

Mr. Amitava Bhattacharya : Chairman, Staff Selection Commission (SSC).

Dr. Vishwa Mohan Katoch : Director-General, Indian Council of MedicalResearch.

Mr. C. Chandramouli : Registrar-General of India and Census Commissioner.

Justice D. K. Jain : Chairman, Law Commission.

Dr. Baldev Raj : President, Indian National Academy of Engineering (INAE).

Mr. Justice (Retd.) B. N. Kirpal : Chairman, National Forest Commission.

Mr. T. Nanda Kumar : Chairperson, National Dairy Development Board

(NDDB).

Lt. General AT Parnaik : Director-General, Border Roads Organisation.Dr. Raghuram Rajan : Governor, RBI.

Justice Mr. Markandey Katju : Chairman, Press Council of India.

Mr. Ravindra Pisharody : Chairman, Audit Bureau of Circulations (ABC).

Mr. R. K. Tewari : Chairman, Central Board of Direct Taxes (CBDT).

Mrs. J.M. Shanti Sundharam : Chairman, Central Board of Excise and

Customs.

Mr. Ashok Chawla : Competition Commission of India

Justice Syed Rafat Alam : Chairman, Central Administrative Tribunal

Mr. G. Sai Prasad : CMD, National Hydroelectric Power Corporation (NHPC).



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Mr. R. S. Sharma : CMD, Oil and Natural Gas Corporation (ONGC).

Mr. B. C. Tripathi : CMD, GAIL.

Mr. S. Behuria : Chairman, IOC.

Mr. Sunil Kumar Srivastava : CMD, Oil India Ltd.Mr. Vineet Joshi : Chairman, Central Board of Secondary Education (CBSE).

Mr. U. K. Sinha : Chairman, Securities and Exchange Board of India (SEBI).

Dr. Harsh Kumar Bhanwala : Chairman, National Bank for Agriculture and

Rural Development (NABARD).

Smt. Arundhati Bhattacharya : Chairman, SBI.

Mr. M. S. Raghavan : Chairman, IDBI.

Justice Dilip Raosaheb Deshmukh : Chairman, Company Law Board.

Mr. Hardeep Singh Puri : India's Permanent Representative to UN.Mr. S. K. Roy : Chairman, Life Insurance Corporation of India (LIC)

Mr. Ashwin Pandya : Chairman, Central Water Commission.

Ms. Mamta Sharma : Chairperson, National Commission for Women.

Dr. Y. V. Reddy: Chairman, 14th Finance Commission.

Dr. Pronob Sen : Chairman, National Statistical Commission.

Smt. Leela Samson : Chairperson, Central Board of Film Certification.

Dr. Rakesh Tewari : Director-General, Archaeological Survey of India (ASI).

Mr. Sidharth Birla : President, Federation of Indian Chambers of Commerceand Industry (FICCI)

Dr. Rahul Khullar : Chairman, Telecom Regulatory Authority of India (TRAI).

Dr. Rajan Katoch : Director, Enforcement Directorate.

Mr. R. V. Verma : Chairman, Pension Fund Regulatory and Development

Authority (PFRDA).

Mr. Pradeep Kumar : Commissioner, Central Vigilance Commissioner (CVC).

Dr. Sekhar Basu : Director, Bhabha Atomic Research Centre.

Mr. N. Ramachandran : President, Indian Olympic Association.Prof. P. Sinclair : Director, National Council of Educational Research and

Training (NCERT).

Mr. S. Gopalakrishnan : President, Confederation of Indian Industry (CII).

Mr. Sam Pitroda : Chairman, National Knowledge Commission.

Mr. Ratan Tata : Chairman, Investment Commission.

Mr. Shivlal Yadav : Interim President, Board of Control for Cricket in India

(BCCI).

Mr. R. Chandrasekaran : Chairman, NASSCOM.

Mr. Ramesh Sippy : Chairman, National Film Development Corporation




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(NFDC).

Mr. Ravindra Kumar: Chairman, United News of India.

Mr. K. N. Shanth Kumar : Chairman, PTI.

Mr. Ravindra Kumar : President, Indian Newspaper Society (INS).Mr. Rana Kapoor : President, The Associated Chambers of Commerce and

Industry of India (ASSOCHAM).



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Basic Financial Terms A-Z

A

AGM - Annual General Meeting, it is the year meeting held by every registered

company. Agenda is to explain the performance during the year, presentation of

annual financial statements, voting on important financial decisions. Any

shareholder can participate in AGM.

Asset turnover ratio - This ratio can be explained as Net assets / Total turnover

or sales. This ratio measures the operational efficiency of business assets. In

simple terms this measures how many time total assets turned in a year and how

efficiently the assets are used in a business.

Acid test ratio - This is one of the important ratio to measure business liquidity.

Business liquidity is defined as ability of a business to pay it;s short term debts.

Acid test ratio = Highly liquid assets / current liabilities

American Depository Receipts - This is the way non-US companies raises

money from US investors. These shares can be traded in US stock exchanges and

denominated in US $.

Amortization - It is an accounting technique by which intangible assets arewritten off over a period of time. For example provision for doubtful debts or

preliminary expenses are written off over a certain period of time.

Annuity - It is an investment scheme under which investor makes recurring

investments and lump sum payment is made to him at the end. Common example

is Recurring deposit account at a post office where people makes small monthly




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deposits and gets their money back at the end of period. Benefit of Annuity is

investor gets compound interest over a period of time.

Asset Management Company - AMC is a company that pools and invests

investor money in pre-determined goals. Pool of funds is known as Mutual fund.

Audit - Financial statement and physical stock is checked annually by

professional auditor ( Chartered Accountant affiliated by ICAI in India )

B

Book-keeping - Recording of financial transactions in books of account.

Bear market - A market situation in which most of the investors thinks that

markets will fall.

Balance of Payment - BOP is the difference between a country's exports and

imports.

C

Capital - Wealth invested by an entrepreneur on his business. Capital = Assets -

Liabilities

Capital gain - Gain by selling a capital asset in which a person is not doing

business. Income by selling a house by a bank employee is a capital gain whereas

when a builder do the same thing it is Income from business and professional.



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Current asset - An asset that can be converted into cash with 12 months. For

example - debtors, stock etc.

Credit rating - A ranking applied to an individual, business or a nation based

upon its credit history and current financial position. There are various credit

rating companies in India such as Crisil.

CPI - Consumer price index is measure to find price of a bundle of commodities.

CPI is used to measure the inflation in a country.

D

Debt consolidation - Debt consolidation is a process by which various loans and

converted into a single loan to reduce interest rate and instalment value.

Depreciation - Depreciation is reduction in value of an asset due wear and tear

over a period of time. For example a company purchased a machine in 2005 and

planned to charge 20% depreciation. In 2010 the machine will be written off from

the books of account.

Dividend - Dividend is the amount per share paid by a company to its

shareholders. Dividend value is based upon company's profitability.

Dividend payout ratio - It is the ratio of dividend paid per share and EPS (

Earning per share )

Double entry bookkeeping - It is a method of bookkeeping in which every

transaction is recorded two accounts. Once in debit side and once in credit side.




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E

Earning per share - Earnings made by a company in a financial year divided by

number of issued shares.

Equity - Value of a business. Equity = Total assets - Total liabilities

Ex-divided - Ex-dividend means without dividend. When a seller makes a ex-

dividend sales contract then he is entitled to get dividend or interest payment.

EBIT - Earning before interest and taxes

EBT - Earning before tax

EAT - Earning after tax

F

Face value - The amount mentioned on face of a bond certificate.

Fixed assets - Assets which can be seen such as machinery

Financial year - A period of 12 months from 1st April to 31st march



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Fundamental analysis - Analysis of a company based upon financial and

operational performance.

Fiscal policy - Income and expenses management by Government.

Flat rate - Rate of interest in a contract which remains same irrespective of

market rate in future.

Floating rate - Rate of interest which changes with change in market rate.

Fund manager - A person who manages a mutual fund and tries to maximize

fund's returns while sticking to fund's objectives.

G

Gearing - It is the ratio of debt to equity

Goodwill - Intangible assets that defines firm's reputation in monetary terms.

Gross profit = Net sales - Net purchases - Direct expenses

GDP - Gross domestic product is the aggregate value of goods and services

produced by every person of a nation.

GST - Goods and services tax is the same tax system for everything. It is

proposed that GST will replace the multi tax system in India by 2015.




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H

Hedging - Hedging is a technique used by investors to protect themselves from

adverse price movements. Derivatives are used for hedging in which hedgers

takes the risk of price fluctuations.

Hedge funds - Mutual funds which invests in derivatives

I

Index - It is statistical measure used to find price variations in market. In stock

markets most dominating stocks are grouped to make an index. For example -

Sensex.

Income statement

A statement that represents both income and expenditure of a business during a

specific period of time.

IPO - Initial public offer is issue of stocks for the first time in the market.

Intangible assets – Assets which can’t be seen but have value for business. For

example – Goodwill.

Indemnity – A legal contract under which one party promises to pay another for

any loses incurred to them by their acts.



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Interest rate risk – Risk that value of financial assets will deteriorate because of

fall in interest rate. For example value of bonds decreases with decrease in interest

rate.

Irredeemable stocks – Stocks which can’t be exchanged for cash in future.

Indirect Costs - Indirect cost is a cost incurred on product that is not directly

related to its production.

J

Junk fund – A fund which invests investor’s money in junk investments means

high risk investments which high returns.

K

KYC – Know Your Customer policy is mandatory in India and every investor

irrespective of his investment volume needs to furnish his identity and residence

details.

L

Libor – London




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Liquidity – Ability of a business to pay off its short term debts with current

assets. Currently NISL is facing liquidity crunch.

Liquid assets – Assets which can be readily converted into cash

Liquid ratio – Liquid assets/Current liabilities

Limited liability –

Liability of an individual or a business up to the value of investment made in a business

M

Monopoly - A situation in market where there are many buyers but a single sellerexist.

Money market - Market dealing in short term lending and borrowing of funds.

Also know as Cash market.

Monetary policy - Set of actions by Central bank of a country ( RBI in case of

India) to control the supply of money. These actions included increase in interest

rate, open market purchases, changing commercial bank's reserve funds ratio

(SLR) etc.

Marginal cost - Additional cost to produce an extra unit of product.



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Margin - Amount of profit added to cost price of each unit of a product

Margin call - Margin call term is used in two situations. First - Whenever a

lender gives a secured loan and loan value is a fixed percentage of loan then

whenever the value of security decrease below the decided ratio then lender given

a margin call to borrower to bring loan to security ratio to decided

level. Secondly in stock exchanges traders trades in various securities by paying

20-30% of the value of securities. Whenever the value of security goes below that

margin, broker gives margin call to trader to bring the margin to desired level.

Mark-to-market - As explained above while defining margin call, value of

assets in case of securities is measured on daily basis. If the trader's asset value

increased, increased value is transferred to his account. In case the value of assets

decreased margin call is made to adjust the margin.

N

NPV - Net Present Value is aggregate of future cash flows from a project minus

total costs. NPV is a capital budgeting technique used to check feasibility of

projects.

Net profit - Net profit is Gross profit minus indirect cost. See indirect costs

Net worth - Net assets - Total liabilities

Nationalization - When Government takes control of a business, this is known as

nationalization.




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NAV - Net Assets Value is mutual fund's per unit exchange traded price

O

Opportunity cost - Additional cost in production of an addition unit of product.

Options - Option is right to buy at pre-determined price at a future date. Option is

used for hedging. Options safeguards option-holder from future price fluctuations.

Overdraft - Facility given by a bank which allows its customers to withdraw

more money than account balance. Overdraft generally have high rate of interest

as borrower can demand and return the loan anytime.

P

Preference shares - A type of shares having no voting rights and have higher rate

of dividend.

Ponzi schemes - It is a kind of fraud scheme which use Network marketing as a

tool. Investors are paid out of new investments. These schemes end when new

investments stop coming and large number of investors wants to withdraw their

money. Latest Ponzi scheme in India was "Speak Asia".

PLR - Prime lending rate is the minimum rate of interest that is to be charged by

a bank. Each bank decides its own PLR.



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R

ROI - Rate on investment is return divided by value of investment

Redemption - Maturity date of a security or a bond

Recession - An economic situation of negative growth

Repo rate - Rate at which Central bank (RBI in case of India) lends money to

commercial banks

Reverse repo rate - Rate at which commercial banks lends to central bank

Right issue - Issue of shares in which existing shareholders gets right to buyshares in proportion of their existing holding

Risk free return - Rate of return, normally it is 90 days bills issued by a national

government

S

Stagnation - An economic situation of slow economic growth, high rate

unemployment and inflation.




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Shorting - Selling securities which an investors don't have in expectation of price

drop

U

Underwriters - In case of an IPO, new companies makes contracts with

underwriter where underwriters promises to purchase unsubscribe shares.

W

Working capital - Money required by a business to run its day to day business.

Working capital = Current assets / Current liabilities

Warrants - A document which gives right to holder to get shares at stated price

Y

Yield - Yield is the return on investment which may in form dividend or interest



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List of Basic Accounting Terms

A

Accounting - process of recording, analysis and reporting monetary transactions

Accounting Concepts - Basic principles upon which accounting is based

Accounts payable - Amount payable by business entity to various parties from

whom good or services have been purchased.

Account receivable - Amount due to business entity to whom goods or serviceshave been sol

Accrual basis - An accounting system which explains that expenses and incomes

should be recognized at the time when they are actually realized.

Amortization - It is the splitting off a loan or intangible assets over a future

period

Annual report - Report issued by a company at the end of year containing all

important financial statements and preview of management's goals.

Authorized share capital - Maximum share capital a company is authorized to

issue

B

Bad debts - Noncollectable receivables

Balance sheet - Statement that summarizes assets and liabilities of a business

entity

Bankruptcy - A state in which an individual or legal entity is unable to pay off

his debts so he surrenders his assets to the court.




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Bill of exchange - A promise to certain amount of money to holder at a specified

date

Bill of lading : A document which represents ownership of goods in transit i.e.

goods during shipping from one place to another.

Bills Payable : A bill which shows that a firm has to pay money to the person or

firm whose name is mentioned in the bill.

Bills receivable : A bill which shows that money is to be paid to firm from those

whose names are mentioned in the bill.

Bonus shares : Shares which are issued to the existing shareholder w

Bookkeeping : This process includes analyzing, classifying and recording from

various sets of books in a very systematic way.

Book value : Historical cost less accumulated depreciation. Generally, it is

accounting value.

Brought down : Written as b/d. It represents the opening balance of an account.

Brought forward : Written as b/f. This term is generally used to open an account

for the current year by posting the closing balance of previous year.

C

Capital expenditure : Cost incurred to acquire fixed assets which spreads

benefits in future.

Capital work-in-progress : Cost incurred in those assets which are not ready yet

for use.

Carried down : Written as c/d. This term a synonym for the term carried forward



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and used to balance an account.

Carried forward : Written as c/f. Term used to transfer the balance from one

period to the another.

Carriage inwards : These are the expenses incurred for transporting the goods

purchased by the firm.

Carriage outwards : Expenses incurred for transporting goods sold by the firm.

Cash : It broadly covers currency and generally accepted equivalents of cash, like

cheques, drafts and demand deposits in bank.

Cash at bank : Deposit with bank.

Cash Book : A book of all transactions or entries for cash payments and receipts.

Cash on hand : Cash available and undeposited.

Closing stock/ Closing inventory : Goods remaining at the end of an accountingperiod.

Conservatism principle : Accounting concept that states that all expected losses

should be recorded but not expected gains.

D

Depreciation : Decrease in value of assets or the cost of an asset is allocated to

that period during which asset is used.

Discount : A deduction from cost of something , offered by seller.

Dividend: A share of profit which is to be distributed to the shareholders.




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Dividend Yield: Ratio of current dividend to the current market price of a share.

Double-entry: Transaction entered in both sides debit as well as credit i.e. every

transaction has to entered twice.

Doubtful debts : A collection of that debt which is doubtful.

Drawings : Withdrawing cash or goods from business for personal use.

Dual Aspect Principle : Also known as Duality Principle. This fundamental

principle of accounting

states that every transaction has a dual effect and should be recorded at twoplaces.

Du-Pont System : The System merges the income statement and balance sheet

into two measures of profitability: Return on Assets (ROA) and Return on Equity

(ROE).

EBIT : Earnings before interest and tax.

Entity Principle : The business firm is treated as a separate entity for the purpose

of accounting.

Equity : A stock or any other security representing an ownership interest.

Exchange Rate : The rate at which one currency can be converted into another.

Expenses : the cost i.e. material or services used in an operation during aspecified period.

F

Face Value : Commonly referred to the amount paid to a bondholder at the

maturity date, given that the issuer doesn't default.



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Financial Asset : An intangible asset that derives value. Stocks, bonds, bank

deposits etc are all examples of financial asset.

Financial Ratio : Ratio based on firm's financial statement which reflects firm'sfinancial condition and performance.

Financial Statement : A formal record of the financial activities of a business,

person or other entity.

Financial data is presented in a structured manner.

Fixed Assets : It includes premises, plant and machinery, furniture, land and

buildings etc.

Fixed Charge : A required payment under a contract.

Freehold Premises : Premises which are not subject to any charge.

Funds Flow Statement : A statement which shows inflow and outflow of funds.

G

Gross Profit Margin : Ratio of Gross profit to net sales i.e. gross profit as a

percentage of net sales.

H

Holding Company : A parent company which holds enough stock in another

company to hold its board of directors.

Human Resource Accounting (HRA) : Measuring the cost and value of

employees and managers in the organisation. It includes the measurement of the

cost incurred to recruit, hire, train and develop employees and managers.

HRA Report : After measuring the cost and value of its people, the organisation




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prepares a report which is known as HRA Report.

I

Imprest : Maintained cash to meet the sundry expenses.

Income Due but not received : Receivable income but not yet received.

Income Received but not due : Income received during current accounting

period which is supposed to be received at some future date.

Income statement : Profit and loss statement that measures the firm's operations.

Insolvency : Inability of debtors to meet their debt obligations i.e. lack of

liquidity.

Intangible assets : Assets like patents, copyrights, goodwill etc which are

valuable but are not physical in nature.

Interest earned ratio : Ratio which measures firm's ability to meet its interest

payments out of its annual earnings i.e. EBIT / Interest expense.

Interest rate risk : Uncertainty in expected returns of securities due to changes in

interest rates.

Inventory : Stock of goods or articles.

J

Journal : A daily record of transactions in which each transaction is based on

double entry bookkeeping i.e. for all transactions both debits and credits are to be

entered.



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L

Ledger : A record of all individual accounts of a business or firm.

Liability : A financial obligation which arises due to some past events or

transactions in business.

M

Marketable securities : Securities which can easily be converted into cash.

Market value : Mutually accepted price of an asset between buyers and sellers. It

is price at which an asset would trade in market.

Matching Principle : States that expenses should be recorded during that period

when it is incurred, regardless the period of transfer of cash.

Miscellaneous expenditure : Lower monetary value costs are misc expenditure

like various meals, ticket prices etc.

Mortgage : A temporary pledge of property to the creditor as a security for an

obligation or the debt repayment.

N

Net block : Net block is what asset are worth to the company. Generally, it isgross block less accumulated depreciation.

Net current assets : Current assets less current liabilities.

Net income : Total earnings of company. It represents firm's total profit or loss,

calculated by taking all revenues and deducting all the costs of the business.

Net profit margin : Net profit or income as a percent of sales i.e. net Income/




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Sales.

O

Operating profit margin : Operating income / Revenue.

Outstanding expenses : Unpaid expenses.

Overdraft : When money is withdrawn from bank account and account balance is

below zero.

P

Paid up capital : The amount of company's capital which has been funded by

shareholders.

Patent : The sole right to make and sell the product for set period of time.

Petty cash book : Record of entries for small amount payments.

Prepaid expenses : Expenses which have been paid but benefits of which is yet to

be received.

Profit and loss account : A statement which shows all revenues and expenses of

firm for a given time period. Subtracting expenses from revenues gives net

income of the firm for that time period, that's why known as profit and lossaccount.

Proposed dividend : Company's board of directors declare an amount of dividend

every year and this amount is noted as a liability in balance sheet. The rate of

proposed dividend can be changed by shareholders in annual general meeting.

Provision for doubtful debts : Keeping aside an amount out of the firm's profit

to meet the losses due to doubtful debts.



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Provision for tax : Keeping aside an amount to meet future tax liability.

R

Realization principle : It states that recognize the revenue only when it is earned.

Redeemable Preference Shares : Preference shares which are redeemed by

issuing company at an agreed price on a specified date.

Reserves and surplus : Accumulated profits of the firm.

Retained earnings : A portion of net income of company which is not distributed

in shareholders and reinvested in core business.

Return on equity : Equity earnings / Net worth.

S

Sales book : A complete record of sales which are made on credit.

Sales Returns Book : A record of entries of those goods which are returned by

customers and earlier sold on credit.

Secured loans : Loan backed by an asset belongs to the borrower, just to reduce

the risk for the lender.

Sinking fund : Fund created by keeping aside some money annually for gradual

repayment of debt.

Sundry expenses : Miscellaneous expenses.




T

Total asset turnover ratio : Net sales/ Total assets.

SBI - Banking Awareness.text.Marked

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