Question on Banking Related Units and Money Market and Capital Market
- What is SEZ?
A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country’s typical economic laws. The category ‘SEZ’ covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. SEZ is a duty free area which is meant for the purposes of trade operations, duties and tariffs for investors. SEZs are specifically demarcated areas within the country where raw materials and capital goods can be imported duty free from abroad or the domestic market and a special package of tax holiday and incentives are given with a view to boost exports from the country. Manufacturing and Services operations are allowed in a SEZ. The basic motto behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of the people.
- What is SIDBI?
Small Industries Development Bank of India (SIDBI) is a financial institution which is headquartered in Lucknow, India. It is a state-run bank aimed to aid the growth and development of micro, small and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.
- What is CRM?
Customer Relationship Management (CRM) refers to the ability to understand, anticipate and manage the needs of the customer, interaction and relationship resulting in increased profitability through revenue and margin growth and operational efficiencies. Today it is used to describe IT systems and software designed to manage this relationship. CRM software will enjoy an increase in productivity and a reduction in costs associated with developing effective sales, marketing and customer service strategies.
- What is Right to information Act?
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State governments. It goes without saying that an informed citizen is better equipped to keep necessary vigil on the instruments of governance and make the government more accountable to the governed. The Act is a big step towards making the citizens informed about the activities of the Government.
The Act applies to all States and Union Territories of India, except the State of Jammu and Kashmir – which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into force on 12 October 2005.
- What is Bitcoin?
Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry book-keeping system in existence.
- What is the Banking Ombudsman Scheme?
The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.
- Which are the banks covered under the Banking Ombudsman Scheme, 2006?
All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.
Question on Money Market and Capital Market
- What is Treasury Bills (TB)?
Treasury bills are categorized as money market instruments, issued when the government need money for a shorter period. It has a maximum maturity of 364 days. Treasury bills are presently issued in three maturities, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. Rather, they are issued at a discount (at a reduced amount) and redeemed (given back money) at the face value at maturity. For example, a 91 day Treasury bill of Rs.100/- (face value) may be issued at say Rs. 98.20, that is, at a discount of say, Rs.1.80 and would be redeemed at the face value of Rs.100/-.
- What is Commercial Paper (CP)?
It is a short term money market instrument, is issued at a discount (at a reduced amount) and redeemed at the face value at maturity. It is issued in the form of promissory note or in a dematerialised form. Big Corporate, primary dealers and the all India financial institution are eligible to issue CP. The maturity period of each commercial paper is SEVEN days to ONE year from the date of issue .CP can be issued denominations of Rs. 5lakh or multiples thereof. Only a schedule bank can act as an issuing and paying agent (IPA) for issuance of CP.
- What is Dematerialisation?
Dematerialisation is a process by which the paper certificates of an investor are taken back by the company/registrar and actually destroyed and an equivalent number of securities are credited in electronic holdings of that investor.
Storage of Dematerialised Shares in Depository, is the body which is responsible for storing and maintaining investor’s securities in demat or electronic format. In India there are two depositories i.e. NSDL and CDSL.
- What is a Demat Account?
Demat is short name of dematerialized account. If one has to save money or make cheque payments, then he/she needs to open a bank account. Similarly, one needs to open a Demat account if he/she wants to buy or sell stocks. Thus, Demat account is similar to a bank account wherein the actual money is being replaced by shares. In order to open a Demat account, one needs to approach the Depository Participants [DPs].
In India, a Demat account is a type of banking account that dematerialise paper-based physical stock shares. The Demat account is used to avoid holding of physical shares, the shares are bought as well as sold through a stock broker. In this case, the advantage is that one does not need any physical evidence for possessing these shares. All the things are taken care of by the DPs.
- Who is a Depository Participant?
Depository Participant (DP) is the market intermediary through which investors can avail the depository services. Depository Participant provides financial services and includes organizations like banks, brokers, custodians and financial institutions.
- What is SENSEX and NIFTY?
SENSEX is the short term for the words “Sensitive Index” and is associated with the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE. Where as NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL SHOW DAILY TRADING MARKS. Sensex and Nifty both are an “index”. An index is basically an indicator it indicates whether most of the stocks have gone up or most of the stocks have gone down.
- What is SEBI?
SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave.
- What is IPO?
IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock exchanges.
- What is FII?
FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII’s generally buy in large volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance Companies, Banks, etc.
- What is FDI?
FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in a Indian Company.
- What is Disinvestment?
The Selling of the government stake in public sector undertakings.
- What are Mutual funds?
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually. A company that invests its clients’ pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.
- What is NABARD?
NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.
- What is Derivative?
A derivative is a financial contract with a value that is derived from an underlying asset such as a commodity, currency, or security. Derivatives have no direct value in and of themselves – their value is based on the expected future price movements of their underlying asset. Forward contract in foreign exchange transaction, is a simple form of a derivative.
Common underlying instruments include: bonds, commodities, currencies, interest rates, market indexes, and stocks. Derivatives are used for speculating and hedging purposes