BANKING LIVE MINTS Marginal standing facility This facility was introduced in order to contain volatility in the

inter-bank overnight market. MSF is a relatively new instrument. RBI first announced about MSF in the annual policy review for the financial year 2011-12; the concept came into existence on 9 May 2011. Under the facility, all scheduled commercial banks can borrow overnight from the central bank up to 1% if their net demand and time liabilities. The facility is available for banks on all working days, except Saturdays. The interest rate was fixed at 100 bps above the repo rate. Under MSF, banks can request for a minimum of Rs.1 crore and thereafter in multiples of Rs.1 crore. This is what it did in July. RBI raised the MSF rate by 200 bps, making the difference with the repo rate 300 bps. Now with the reduction of 75 bps in MSF and 25 bps increase in the repo rate, the difference stands at 200 bps. RBI is expected to reduce the difference as the currency begins to show signs of greater stability.

What is implied volatility? it is the expected volatility of an asset price in future. Global saving glut is one of the many explanations for the financial crisis White label automated teller machines (ATMs) or WLAs, These are ATMs that are mandated to be set up by NBFCs and will not have any bank branding. Similar to other ATMs, these ATMs can be used by any domestic debit card holder to withdraw cash, make a balance inquiry, change the personal identification number or ask for mini statements. All guidelines applicable to other bank-reported ATMs will also be applicable to WLAs. First it was Tata Communications Payment Solutions Ltd (TCPS), a wholly-owned subsidiary of Tata Communications Ltd, which in June 2013 set up white label automated teller machines (ATMs), or WLAs. since the announcement of WLA licence was made by the Reserve Bank of India (RBI) in February 2012, 13 non-banking finance companies (NBFCs) have been given in-principle approval to set up WLAs. Until now, only TCPS has started operations and aims to set up 15,000 ATMs in the next three years; Muthoot Finance is expected to follow. What is leverage? Businesses and individuals do not always invest their own money. They use various types of debt instruments to fund their business or investment. In the financial world, this is known as leverage. e-Insurance account If you invest in shares or mutual funds (MF) electronically, you would know what a demat account is. The biggest benefit it provides is that it keeps all your investments electronically together in one account so that you dont run the risk of losing your physical documents. Soon, you would be able to store even your insurance policies electronically under a single electronic insurance account or e-Insurance account. What is subvention scheme? Subvention literally means a grant of money, especially from a government. In fact, there is an interest subvention scheme to support low and middle income housing and under it the government pays one percentage point of interest for home loans up to Rs.15 lakh for houses costing up to Rs.25 lakh. Earlier, the limit was Rs.10 lakh and Rs.20 lakh, respectively. The Union Budget 2012 increased the limit, keeping in mind the shortage of lowincome housing in various towns and cities across the country. This was also done to boost the real estate market which was not growing in this space.

The latest rules announced by IRDA on banks as insurance brokers mandate a professional indemnity cover for these entities. A professional indemnity policy covers losses to clients

on account of negligence in discharge of professional duties. It can be bought by any person or entity that can be held accountable for the services they offer. This cover is popular among doctors and is increasingly getting bought by other classes of professionals such as lawyers, chartered accountants, architects and engineers. As a service provider, you get paid for the service you provide. So someone who avails that service reserves the right to question you if you fail to deliver and drag you to court for it. Your professional indemnity cover kicks in here. The policy pays for the amount of claim that arises if you lose the case filed against you; it also pays for the legal fees.

The Reserve Bank of India recently gave permission to the Kerala government to launch a financial institution that would be compliant with the rules of Islamic finance. Islamic finance adheres to Sharia laws on investments and interest. The fundamental principles of Islamic finance say that any financing should not involve riba (there should be no giving or receiving of interest), gharar (there should be no speculation involved in the financed projects) and haram (investment in certain products such as alcohol, gambling and pork which are prohibited by Islamic law). So Islamic finance prohibits interest-based and speculative transactions, among other things. However, both risk and reward may be shared by all stakeholders, including customers, at a pre-determined rate. The products offered by these institutions are Shariacompliant. Interest-free payment holiday, a facility offered only by credit cards, gives you more time to make a particular payment. A majority of credit cards have a payment period of 45-55 days. For instance, if you swipe a credit card on 11 June, your bill will get generated on 12 July and your payment due date will be 30 July. So here the window between the actual spending date and the payment due date is approximately 50 days. Almost all banks offer similar payment windows of 45-50 days. In case you fail to pay on the due day, interest in the range of 22-44% per annum will be levied; the rate varies between banks. For instance, HDFC Bank Ltd charges a rate of 3.25% per month, while Axis Bank Ltd charges between 1.95% and 2.95% per month, as per their websites. In the example mentioned above, if you get a three-month interest-free payment holiday on your credit card, your bill will be generated in the 11 October statement instead of 11 July. There is no paperwork required to enrol for the offer. Usually, you get an SMS/e-mail alert from your bank. If you decide to opt for the payment holiday, then simply delay paying your bill by that period. If you want to stay away from this, just keep paying your bills on time

What is CSR? The United Nations Industrial Development Organization defines CSR as a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. It further elaborates that it is a way through which a company attains a balance between economic, social and environmental objectives. The Companies Bill passed by Parliament last week mandates that companies, subject to certain conditions, will now have to spend at least 2% of their net profit on activities related to corporate social responsibility (CSR) . According to the Bill, every company with a net worth of Rs.500 crore or more, or with revenue of at least Rs.1,000 crore or a net

profit of above Rs.5 crore will have to spend on CSR. The company will be required to constitute a committee for CSR with at least three directors, of which one or more would be independent directors. The committee will be required to formulate a CSR policy. The board will have to ensure that in any financial year, the company spends at least 2% of the average net profit made in the preceding three financial years on CSR. In case the company fails to spend the amount on CSR, the board will have to explain the reasons along with other disclosures.

What is impossible trinity? Impossible trinity or trilemma in monetary policy means that a country cannot have a fixed exchange rate, free movement of capital and an independent monetary policy at the same time. Lets understand this theoretically. Suppose, a country that has a fixed exchange rate raises interest rates to curb in inflation. Higher interest rates will attract foreign capital. Since the country has a fixed exchange rate, the central bank will have to buy foreign exchange to maintain the peg which will lead to injection of domestic currency in the market. The rise in availability of money in the market will bring down its cost (read interest rate) and defeat the central banks idea of curbing inflation by raising interest rates. This is why a lot of countries also have capital control in place which allows them to maintain stable currency and have more authority on the monetary policy. What are BSE Dollex-30 and CNX Defty? BSE Ltds Dollex-30 and National Stock Exchanges Defty are indices that are adjusted for exchange rate movements between the dollar and rupee. These indices were developed by the exchanges to provide a benchmark to foreign institutional investors (FIIs) and off-shore funds, to provide them with an instrument for measuring returns on their equity investments in dollar terms. The base year for the Dollex-30 is fixed as 1978-79. BSE will use the average exchange rate of the base year for its computation. For the Defty, the base date is set as 3 November 1995. What is decoupling? It means an emerging economy does not need the support of the developed world for growth. Marking to market is the practice of showing assets at a value which is current or valuing the asset at the current market price. In case of securities such as stocks and bonds held in a portfolio either on your own or an MF, marking to market is done on a daily basis. Speculation refers to trades in the financial markets intended to make short-term gains on assets. The positions are often leveraged and risky. It is different from investing, though the issue is debatable The Reserve Bank of India on 15 July announced measures to curb liquidity in the Indian market. The idea is to raise the cost of money in the system and reduce speculation on rupee. Discount broking is a specific model offered to clients wherein they pay a highly discounted rate of brokerage for trading in financial assets such as equity and commodities. This is often in the form of a flat brokerage or if it is applied per trade, then there is an upper limit on the broking charges.

Shadow banking is increasingly being viewed as a risk to the countrys financial stability. Shadow banking refers to a bank-like activity outside the banking system like NBFC In India Delisting means a permanent removal of shares of a listed company from the stock exchange. Differently put, shares of a delisted company are not available for trade in the stock market. The delisting of shares can be voluntary or forced. Tata Communications Ltd announced in May that it will delist its American Depository Receipts from the New York Stock Exchange. Indian markets may also see some delisting activity as some companies failed to meet the Securities and Exchange Board of Indias (Sebi) mandate of having 25% minimum public shareholding in the given time frame. Asset-liability mismatch can arise if a significant part of the liability of a bank (read deposits) is of shorter tenor and the assets (read loans) are of longer tenor. For example, if large part of the deposits with a bank has a maturity of two-three years, and the bank lends that money to an infrastructure company for, say, 20 years, there could be a payment crisis as the money is locked with the borrower. The growing divergence in the tenors of loans and deposits has resulted in rising mismatches in the asset-liability statements of many banks, noted India Ratings and Research, a rating agency In the September 2012 circular issued by the Securities and Exchange Board of India to reenergize the mutual fund (MF) industry, it directed the Association of Mutual Funds of India (Amfi) to create a unique identity number in addition to the Amfi registration number (ARN) of a distributor. While an ARN is more for the purpose of identifying and attributing commission to the distributor; an EUIN serves the purpose of identifying the person who has sold a fund to you. A photo identity card with the EUIN will be issued to each person interacting with investors for selling or marketing MFs. These are commercial transactions between different companies of a multinational group for a price which is termed as transfer price. The income tax department, government of India defines transfer price as commercial transactions between different parts of multinational groups may not be subject to the same market forces shaping relations between two independent firms. One party transfers to another goods or services, for a price. That price is known as transfer price. A rise in the level of consumer spending is a natural outcome of increasing income in a growing economy. However, consumer spending also goes up if the value of different assets rise in an economy due to various factors. The rise in consumer spending due to higher asset prices is termed as wealth effect. Higher asset prices will lead to the wealth effect and consumers will spend more. What is asset price bubble? Asset price bubble is a state when the price of an asset goes up rapidly in a short span of time and is not supported by the fundamentals. This can happen in stocks, commodities or land and housing.

What is imported inflation? When the general price level rises in a country because of the rise in prices of imported commodities, inflation is termed as imported. Purchasing Managers Index (PMI) PMI is typically reported every month and is an absolute number which reflects the operational activity (whether it is expanding or contracting) of private companies within a particular sector, based on responses to a survey. The India Services PMI includes six industries in the sectortransport and communications, financial intermediation, business services, personal services, computing and IT and hotels and restaurants What is public debt? The government in any country borrows from the market or other sources in order to bridge the gap between its revenue and expenditure. The money that government owes is known as public debt or national debt. The total stock of public debt of a country is normally expressed in terms of its size of the gross domestic product (GDP), referred to as debt to GDP ratio. A higher level of public debt can lead to a number of negative consequences. Higher borrowing by the government, for example, will leave so much little for the private sector to borrow for investment. With competition in the debt market, the cost of money will go up. Higher interest rates will affect investment and consumption and will result in lower growth. Higher public debt also means that the government will spend a large portion of its budget on interest payment, which could affect its other development commitments. However, rise in public debt is not always a bad thing. There is a chance that government increases its spending in an environment of general economic slowdown. Higher government expenditure will generate demand and help revive economic growth. What is an open offer? According to Securities and Exchange Board of India takeover guidelines, if a company acquires 25% stake in a listed company, the acquiring company must launch an open offer for buying at least 26% more stake from the companys public stakeholders. After making an announcement, the acquiring company fixes a share price, which is usually at a premium to the market price. After the price is fixed, the company gives a deadline to existing shareholders to tender their shares. An open offer can also be triggered when a stakeholder/promoter of the firm with at least 25% stake or voting right intends to enhance his stake by at least 5% in a single financial year. If you want to shift your money from one fund to another in the same fund house, you can just submit a switch request.

What is STT? securities transaction tax (STT) is a tax levied on the sale and purchase of securities on stock exchanges in India. This tax was introduced in the Union budget of 2004 and was made effective from 1 October 2004. The rate is set by the government and depends on the type of security and whether the transaction is a purchase or a sale.
Star ratings tell you a bit about the funds performance. Various mutual fund tracking firms, such as Value Research and Morningstar, assign star ratings to various schemes. The more the number of stars assigned to a scheme, the better the scheme is said to have performed. Typically, five stars signify best performance and one star represent worst performance. So even

though all schemes get stars, it makes sense for only the higher rated schemes to show their own star ratings. Fund factsheets cannot carry these ratings. A spread is the difference in the yields between two classes of debt instruments such as government securities (G-secs) and corporate bonds, or even within different instruments in the same class but those that carry different credit ratings, such as a AAA-rated bond and AA-rated bond. For instance, if a one-year Gsecs yield is 8.74% and a government-owned firms bond of a similar tenor is 9.997%, then the difference or the spread between the two is 1.257%. MFs offer systematic investment plans (SIPs), whereby you can invest a sum of money (usually a fixed sum, but it can also be made variable if your fund house allows) every month. Micro SIP is a facility that allows you to invest in MFs up to Rs.50,000 a year. Targeted at the weaker sections of society, micro SIPs do not require investors to submit their permanent account number card. Remember to tick the box that says micro SIP in your SIP application form. What is a gilt fund? These are fixed-income funds that invest in government securities (G-secs). While a number of them are called gilt funds, some others are simply called G-sec funds. What is EEE? EEE stands for exempt, exempt, exempt. Here, the first exempt means that your investment is allowed for a deduction. So, you dont have to pay tax on part of the salary that equals the invested amount. Similarly, the second exempt implies that you dont have to pay any tax on the returns earned during the accumulation phase. The third and final exempt means that your income from the investment would be taxfree in your hands at the time of withdrawal EEE status is generally enjoyed by longterm investment vehicles, such as Public Provident Fund and Employees Provident Fund. Currently, other instruments such as equity-linked savings schemes (ELSS) and life insurance policies also enjoy the EEE status What is EET? EET is exempt, exempt, taxed. Your money at the stages of contribution and accumulation is exempt from tax, which is explained by EE, but at the time of withdrawal, you need to pay a tax on it, denoted by T. Since your accumulationprincipal plus returnis taxed at the time of withdrawal, your returns from such instruments come down, depending on your tax slabs. For instance, if you fall in the 20% tax bracket and the rate of return on your investment is 8%, you will lose out 20% of that return and make only 6.4% on your investment. What is ETE? ETE stands for exempt, taxed, exempt. If you have an instrument with this status, you would have to pay a tax only on the interest component. For example, a five-year fixed deposit enjoys the ETE status, where the amount you invest qualifies for a deduction, the interest is taxed and at the time of maturity you neednt pay tax on your principal. Compounded annual growth rate (CAGR) is a way to calculate long-term returns. There are two ways of calculating your income from an investment such as a mutual fund over a period of timesimple interest and CAGR. CAGR takes the first and last points of investment to calculate returns. It also accounts for the time period you remain invested. Say, you invest Rs.10,000 on 1 June 2007. On 31 December 2009, your investment grows to Rs.20,000 and you want to sell your investment. You have stayed invested for around two-and-a-half years. Ordinarily, you

would think that your money has doubled, so your return would be 100%. But as per the CAGR, your returns are 26%. That is your money grows by 26% per year over the period of investment. A benchmark index is used to compare returns of a fund. An addendum is issued if there is any change in the offer document. What is Dutch disease? Dutch disease is basically a condition when exports in one sector affects activity in other sectors Organic growth refers to a companys internal core growth and it does not take into account growth induced through acquisitions, mergers and takeovers, which come under inorganic growth Abenomics refers to the economic ideas of Shinzo Abe, the new Prime Minster of Japan, who campaigned and won the election last year on the promise of massive monetary and fiscal stimulus to end deflation in the third-largest economy in the world. What is bitcoin? A virtual currency known as bitcoin has gained prominence recently. The currency remains in the hard drive of computers and can be transferred to others at low cost. This virtual currency is said to be acceptable on some of the websites as a medium of exchange as well. Interestingly, this currency does not have the backing of any government or central bank and has been reportedly created by an anonymous group of programmers. Daily Moving Average: DMA helps recognize the change in a trend by removing daily price volatility. A fast or short DMA is a brief time of 10 or 15 days, whereas a slow or long DMA is a longer period of 50-200 days. What is deposit insurance? It is a protection cover that you get on your deposits in banks. Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India (RBI), provides insurance for bank deposits. As of now 2,199 banks are insured by DICGC. Risk, as mentioned, is the degree of change in prices in either direction. India VIX also measures the expected change in the underlying index which is the Nifty. Unlike Nifty which is a price index, a volatility index is computed by looking at the order book change of the underlying Nifty options. It is not reported in a static rupee form like the Nifty, rather as an annual percentage. Who is a wilful defaulter? There are many people and entities who borrow money from lending institutions but fail to repay. However, not all of them are called wilful defaulters. According to the Reserve Bank of India, a wilful defaulter is one who is financially capable to repay and yet does not do so ICOR incremental capital output ratio basically refers to the additional capital required to generate additional output.

EPF NO. : This number is alphanumeric. The first two entries indicate the regional PF office in which your company contributes your money. For instance, if your company contributes in the regional EPF office at Bandra, Mumbai in Maharashtra, the entry will look like MH/BAN. The next entry will be in digits. This will be the employers code, followed by the employees account number. What is carry trade? Carry trade is basically a trade on interest rate arbitrage. Traders borrow in currencies in which interest rates are low and invest in the countries where rates are high. For example, a trader can borrow at close to zero percent in Japan and invest in the Indian debt market at 8% and thereby gain. offer for sale (OFS): BSE Ltd plans an initial public offer. The issue will be an offer for sale (OFS) and gives an opportunity to existing investors to exit. OFS is the way by which stakeholders of a company sell their holding. OFS is the way by which promoter/s of a company sell their holding. What is a credit score? Credit score is a number based on your credit report, which is a summary of your past and current borrowing and your repayment history, What is inflation targeting? A lot of other central banks partially adopted inflation targeting along with other objectives such as output stabilization. In the inflation targeting framework, the central bank projects the trajectory of inflation in the medium term and attempts to bring it closer to the target level through tools such as interest rates. Tax saving An investment product that allows you to set-off the investment as a deduction on your taxable income is known as a tax-saving product. Tax free: Interest is taxable under the Indian tax laws, but special products that waive the tax are called tax-free products. twin deficit It refers to a situation where a country runs relatively large current account and fiscal deficits. What is ECB? External commercial borrowing (ECB) means companies in India are allowed to borrow from overseas, under certain conditions, through different instruments. Who is a business correspondent? BCs work in far-flung areas where the bank does not have a presence, but wants to provide services. What is pledging of shares? Shares ka Girvi Rakhna for Debt as a security