RBI

It is a central bank of Government of India; It is guiding, monitoring, regulating,

promoting and controlling the Indian financial system. (GRMPC)
Established on April 01, 1935 under RBI Act 1934.
Nationalized in 1948 under RBI Act 1948.
It has a fundamental commitment to maintaining the nations monetary and financial
stability.
From ensuring stability of interest and exchange rates,
to providing liquidity and an adequate supply of currency and credit for the real
sector;
from ensuring bank penetration and safety of depositors funds
to promoting and developing financial institutions and markets, and
maintaining the stability of the financial system through continued macro-financial
surveillance,
the Reserve Bank plays a crucial role in the economy.

Central board comprises of the governor, four deputy governors and fifteen
nominated directors. RBI is managed by central board of directors and four local
board of directors and four deputy governor.
It has set up local board in four metropolitan city headed by director. It has offices in
16 cities to discharge currency function.
DEFINITION OF 'BANK RATE'
The interest rate at which a nation's central bank lends money to domestic banks.
Often these loans are very short in duration. Managing the bank rate is a preferred
method by which central banks can regulate the level of economic activity. Lower
bank rates can help to expand the economy, when unemployment is high, by
lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign
in the economy, when inflation is higher than desired.
The bank rate can also refer to the interest rate which banks charge customers on
loans.
Definition of 'Repo Rate'
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Repo rate is the rate at which the central bank of a country (RBI in case of India)
lends money to commercial banks in the event of any shortfall of funds.
Definition: Repo rate is the rate at which the central bank of a country (Reserve
Bank of India in case of India) lends money to commercial banks in the event of any
shortfall of funds. Repo rate is used by monetary authorities to control inflation.

Description: In the event of inflation, central banks increase repo rate as this acts as
a disincentive for banks to borrow from the central bank. This ultimately reduces the
money supply in the economy and thus helps in arresting inflation.
The central bank takes the contrary position in the event of a fall in inflationary
pressures. Repo and reverse repo rates form a part of the liquidity adjustment
facility.
NVESTOPEDIA EXPLAINS 'DISCOUNT HOUSE'
A discount house is a money dealer that participates in the buying and discounting
of bills of exchange and other financial products such as money markets, certain
government bonds and banker's acceptances.
Difference Between FDI and FII
Categorized under Business | Difference Between FDI and FII
investmentFDI vs FII
Both FDI and FII is related to investment in a foreign country. FDI or Foreign Direct
Investment is an investment that a parent company makes in a foreign country. On
the contrary, FII or Foreign Institutional Investor is an investment made by an
investor in the markets of a foreign nation.
In FII, the companies only need to get registered in the stock exchange to make
investments. But FDI is quite different from it as they invest in a foreign nation.
The Foreign Institutional Investor is also known as hot money as the investors have
the liberty to sell it and take it back. But in Foreign Direct Investment, this is not
possible. In simple words, FII can enter the stock market easily and also withdraw
from it easily. But FDI cannot enter and exit that easily. This difference is what
makes nations to choose FDIs more than then FIIs.
FDI is more preferred to the FII as they are considered to be the most beneficial kind
of foreign investment for the whole economy.

Foreign Direct Investment only targets a specific enterprise. It aims to increase the
enterprises capacity or productivity or change its management control. In an FDI,
the capital inflow is translated into additional production. The FII investment flows
only into the secondary market. It helps in increasing capital availability in general
rather than enhancing the capital of a specific enterprise.
The Foreign Direct Investment is considered to be more stable than Foreign
Institutional Investor. FDI not only brings in capital but also helps in good
governance practises and better management skills and even technology transfer.
Though the Foreign Institutional Investor helps in promoting good governance and
improving accounting, it does not come out with any other benefits of the FDI.

While the FDI flows into the primary market, the FII flows into secondary market.
While FIIs are short-term investments, the FDIs are long term.
Summary
1. FDI is an investment that a parent company makes in a foreign country. On the
contrary, FII is an investment made by an investor in the markets of a foreign
nation.
2. FII can enter the stock market easily and also withdraw from it easily. But FDI
cannot enter and exit that easily.
3. Foreign Direct Investment targets a specific enterprise. The FII increasing capital
availability in general.
4. The Foreign Direct Investment is considered to be more stable than Foreign
Institutional Investor

Read more: Difference Between FDI and FII | Difference Between | FDI vs FII
http://www.differencebetween.net/business/difference-between-fdi-andfii/#ixzz3HSdB32xi
Definition of 'Monetary Policy'
The actions of a central bank, currency board or other regulatory committee that
determine the size and rate of growth of the money supply, which in turn affects
interest rates. Monetary policy is maintained through actions such as increasing the
interest rate, or changing the amount of money banks need to keep in the vault
(bank reserves). In the United States, the Federal Reserve is in charge of monetary
policy. Monetary policy is one of the ways that the U.S. government attempts to
control the economy. If the money supply grows too fast, the rate of inflation will
increase; if the growth of the money supply is slowed too much, then economic
growth may also slow. In general, the U.S. sets inflation targets that are meant to
maintain a steady inflation of 2% to 3%.
Definition of 'Fiscal Policy'
These are the Government spending policies that influence macroeconomic
conditions. Through fiscal policy, regulators attempt to improve unemployment
rates, control inflation, stabilize business cycles and influence interest rates in an
effort to control the economy. Fiscal policy is largely based on the ideas of British
economist John Maynard Keynes (18831946), who believed governments could
change economic performance by adjusting tax rates and government spending.
To illustrate how the government could try to use fiscal policy to affect the
economy, consider an economy thats experiencing a recession. The government
might lower tax rates to try to fuel economic growth. If people are paying less in
taxes, they have more money to spend or invest. Increased consumer spending or
investment could improve economic growth. Regulators dont want to see too great
of a spending increase though, as this could increase inflation.
Another possibility is that the government might decide to increase its own
spending say, by building more highways. The idea is that the additional
government spending creates jobs and lowers the unemployment rate. Some
economists, however, dispute the notion that governments can create jobs, because

government obtains all of its money from taxation in other words, from the
productive activities of the private sector.
One of the many problems with fiscal policy is that it tends to affect particular
groups disproportionately. A tax decrease might not be applied to taxpayers at all
income levels, or some groups might see larger decreases than others. Likewise, an
increase in government spending will have the biggest influence on the group that
is receiving that spending, which in the case of highway spending would be
construction workers.
Fiscal policy and monetary policy are two major drivers of a nations economic
performance. Through monetary policy, a countrys central bank influences the
money supply. Regulators use both policies to try to boost a flagging economy,
maintain a strong economy or cool off an overheated economy.

Mutual Funds