Account Agreement: The contract governing your open-end credit account, it provides information on changes that may occur to the account.Account History: The payment history of an account over a specific period of time, including the number of times the account was past due or over limit.Account Holder: Any and all persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the bank. The signature authorizes that person to conduct business on behalf of the account.

Acquiring Bank: In a merger, the bank that absorbs the bank acquired.Accrued interest: Interest due from issue date or from the last coupon payment date to the settlement date. Accrued interest on bonds must be added to their purchase price.Adjustable-Rate Mortgages (ARMS): Also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change. There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement. If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well.Arbitrage: Buying a financial instrument in one market in order to sell the same instrument at a higher price in another market.Adverse Action: Under the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account.Adverse Action Notice: The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.AER: Annual earnings rate on an investment.Alteration: Any change involving an erasure or rewriting in the date, amount, or payee of a check or other negotiable instrument.Amortization: The process of reducing debt through regular installment payments of principal and interest that will result in the payoff of a loan at its maturity.Anytime Banking: With introduction of ATMs, Tele-Banking and internet banking, customers can conduct their business anytime of the day and night. The 'Banking Hours' is not a constraint for transacting banking business.Anywhere Banking : Refers to banking not only by ATMs, Tele-Banking and internet banking, but also to core banking solutions brought in by banks where customer can deposit his money, cheques and also withdraw money from any branch connected with the system. All major banks in India have brought in core

banking in their operations to make banking truly anywhere banking.Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a percentage.Annual Percentage Yield (APY): A percentage rate reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day year.Annuity : A life insurance product which pays income over the course of a set period. Deferred annuities allow assets to grow before the income is received and immediate annuities (usually taken from a year after purchase) allow payments to start from about a year after purchase.APR: The annual percentage rate of interest, usually on a loan or mortgage, usually displayed in brackets and representing the true cost of the loan or mortgage as it shows any additional payments beyond the interest rate.Application: Under the Equal Credit Opportunity Act (ECOA), an oral or written request for an extension of credit that is made in accordance with the procedures established by a creditor for the type of credit requested.Appraisal: The act of evaluating and setting the value of a specific piece of personal or real property.Ask Price: The lowest price at which a dealer is willing to sell a given security.Asset-Backed Securities (ABS): A type of security that is backed by a pool of bank loans, leases, and other assets. Most ABS are backed by auto loans and credit cards – these issues are very similar to mortgage-backed securities.At-the-money: The exercise price of a derivative that is closest to the market price of the underlying instrument.ATM: ATMs are Automatic Teller Machines, which do the job of a teller in a bank through Computer Network. ATMs are located on the branch premises or off branch premises. ATMs are useful to dispense cash, receive cash, accept cheques, give balances in the accounts and also give mini-statements to the customers.Authorization: The issuance of approval, by a credit card issuer, merchant, or other affiliate, to complete a credit card transaction.Automated Clearing House (ACH): A computerized facility used by member depository institutions to electronically combine, sort, and distribute inter-bank credits and debits. ACHs process electronic transfers of government securities and provided customer services, such as direct deposit of customers' salaries and government benefit payments (i.e., social security, welfare, and veterans' entitlements), and preauthorized transfers.Automated Teller Machine (ATM): A machine, activated by a magnetically encoded card or other

medium that can process a variety of banking transactions. These include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts.Automatic Bill Payment: A checkless system for paying recurring bills with one authorization statement to a financial institution. For example, the customer would only have to provide one authorization form/letter/document to pay the cable bill each month. The necessary debits and credits are made through an Automated Clearing House (ACH).Availability Date: Bank's policy as to when funds deposited into an account will be available for withdrawal.Availability Policy: Bank's policy as to when funds deposited into an account will be available for withdrawal.Available Balance: The balance of an account less any hold, uncollected funds, and restrictions against the account.Available Credit: The difference between the credit limit assigned to a cardholder account and the present balance of the account.

Banking: Accepting for the purpose of lending or investment of deposits of money from Public, Repayable on demand or otherwise and withdraw able by cheques, drafts, order, etc.Bank Ombudsman: Bank Ombudsman is the authority to look into complaints against Banks in the main areas of collection of cheque / bills, issue of demand drafts, non-adherence to prescribed hours of working, failure to honour guarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and advances where banks flout directions / instructions of RBI. This Scheme was announced in 1995 and is functioning with new guidelines from 2007. This scheme covers all scheduled banks, the RRBs and co-operative banks.Bancassurance: Bancassurance refers to the distribution of insurance products and the insurance policies of insurance companies which may be life policies or non-life policies like home insurance - car insurance, medi-policies and others, by banks as corporate agents through their branches located in different parts of the country by charging a fee.Banker's Lien: Bankers lien is a special right of lien exercised by the bankers, who can retain goods bailed to them as a security for general balance of account. Bankers can have this right in the absence of a contract to the contrary.Basel-II: The Committee on Banking Regulations and Supervisory Practices, popularity known as Basel Committee, submitted its revised version of norms in June, 2004. Under the revised accord the capital requirement is to be calculated for credit, market and operational risks. The minimum requirement

continues to be 8% of capital fund (Tier I & II Capital) Tier II shall continue to be not more than 100% of Tier I Capital.Brick & Mortar Banking: Brick and Mortar Banking refers to traditional system of banking done only in a fixed branch premises made of brick and mortar. Now there are banking channels like ATM, Internet Banking, tele banking etc.Business of Banking : Accepting deposits, borrowing money, lending money, investing, dealing in bills, dealing in Foreign Exchange, Hiring Lockers, Opening Safe Custody Accounts, Issuing Letters of Credit, Travelers’ Cheques, doing Mutual Fund business, Insurance Business, acting as Trustee or doing any other business which Central Government may notify in the official Gazette.Bouncing of a cheque: Where an account does not have sufficient balance to honour the cheque issued by the customer, the cheque is returned by the bank with the reason "funds insufficient" or "Exceeds arrangement”. This is known as 'Bouncing of a cheque’.Basis Point: One hundredth of 1%. A measure normally used in the statement of interest rate e.g., a change from 5.75% to 5.81% is a change of 6 basis points. Bear Markets: Unfavorable markets associated with falling prices and investor pessimism.Bid-ask Spread: The difference between a dealers’s bid and ask price.Bid Price: The highest price offered by a dealer to purchase a given security.Blue Chips: Blue chips are unsurpassed in quality and have a long and stable record of earnings and dividends. They are issued by large and well-established firms that have impeccable financial credentials.Bond: Publicly traded long-term debt securities, issued by corporations and governments, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity.Book Value: The amount of stockholders’ equity in a firm equals the amount of the firm’s assets minus the firm’s liabilities and preferred stock. Broker: Individuals licensed by stock exchanges to enable investors to buy and sell securities.Brokerage Fee: The commission charged by a broker.Bull Markets: Favorable markets associated with rising prices and investor optimism.

Call Option: The right to buy the underlying securities at a specified exercise price on or before a specified expiration date.Callable Bonds: Bonds that give the issuer the right to redeem the bonds before their stated maturity.

Capital Gain: The amount by which the proceeds from the sale of a capital asset exceed its original purchase price.Capital Markets: The market in which long-term securities such as stocks and bonds are bought and sold.Certificate of Deposits (CDs): Savings instrument in which funds must remain on deposit for a specified period and premature withdrawals incur interest penalties.Certificate of Deposit:. Certificate of Deposits are negotiable receipts in bearer form which can be freely traded among investors. This is also a money market instrument,issued for a period ranging from 7 days to f one year .The minimum deposit amount is Rs. 1 lakh and they are transferable by endorsement and delivery.Cheque: Cheque is a bill of exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.Cheque Truncation: Cheque truncation truncates or stops the flow of cheques through the banking system. Generally truncation takes place at the collecting branch, which sends the electronic image of the cheques to the paying branch through the clearing house and stores the paper cheques with it.Closed-end (Mutual) Fund: A fund with a fixed number of shares issued, and all trading is done between investors in the open market. The share prices are determined by market prices instead of their net asset value.Collateral: A specific asset pledged against possible default on a bond. Mortgage bonds are backed by claims on property. Collateral trusts bonds are backed by claims on other securities. Equipment obligation bonds are backed by claims on equipment.Commercial Paper: Short-term and unsecured promissory notes issued by corporations with very high credit standings.Common Stock: Equity investment representing ownership in a corporation; each share represents a fractional ownership interest in the firm.Compound Interest: Interest paid not only on the initial deposit but also on any interest accumulated from one period to the next.Contract Note: A note which must accompany every security transaction which contains information such as the dealer’s name (whether he is acting as principal or agent) and the date of contract.Controlling Shareholder: Any person who is, or group of persons who together are, entitled to exercise or control the exercise of a certain amount of shares in a company at a level (which differs by jurisdiction) that triggers a mandatory general offer, or more of the voting power at general meetings of the issuer, or

who is or are in a position to control the composition of a majority of the board of directors of the issuer.Convertible Bond: A bond with an option, allowing the bondholder to exchange the bond for a specified number of shares of common stock in the firm. A conversion price is the specified value of the shares for which the bond may be exchanged. The conversion premium is the excess of the bond’s value over the conversion price.Corporate Bond: Long-term debt issued by private corporations.Coupon: The feature on a bond that defines the amount of annual interest income.Coupon Frequency: The number of coupon payments per year.Coupon Rate: The annual rate of interest on the bond’s face value that a bond’s issuer promises to pay the bondholder. It is the bond’s interest payment per dollar of par value.Covered Warrants: Derivative call warrants on shares which have been separately deposited by the issuer so that they are available for delivery upon exercise.Credit Rating: An assessment of the likelihood of an individual or business being able to meet its financial obligations. Credit ratings are provided by credit agencies or rating agencies to verify the financial strength of the issuer for investors.Collecting Banker: Also called receiving banker, who collects on instruments like a cheque, draft or bill of exchange, lodged with himself for the credit of his customer's account.Consumer Protection Act: It is implemented from 1987 to enforce consumer rights through a simple legal procedure. Banks also are covered under the Act. A consumer can file complaint for deficiency of service with Consumer District Forum for amounts upto Rs.20 Lacs in District Court, and for amounts above Rs.20 Lacs to Rs.1 Crore in State Commission and for amounts above Rs.1 Crore in National Commission. Co-operative Bank : An association of persons who collectively own and operate a bank for the benefit of consumers / customers, like Saraswat Co-operative Bank or Abhyudaya Co-operative Bank and other such banks.Co-operative Society : When an association of persons collectively own and operate a unit for the benefit of those using its services like Apna Bazar Co-operative Society or Sahakar Bhandar or a Co-operative Housing Society.Core Banking Solutions (CBS): Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.

Creditworthiness: It is the capacity of a borrower to repay the loan / advance in time along with interest as per agreed terms.Crossing of Cheques: Crossing refers to drawing two parallel lines across the face of the cheque. A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing. A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.Customer: A person who maintains any type of account with a bank is a bank customer. Consumer Protection Act has a wider definition for consumer as the one who purchases any service for a fee like purchasing a demand draft or a pay order. The term customer is defined differently by Laws, softwares and countries.Current Account: Current account with a bank can be opened generally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account.Currency Board: A monetary system in which the monetary base is fully backed by foreign reserves. Any changes in the size of the monetary base have to be fully matched by corresponding changes in the foreign reserves.Current Yield: A return measure that indicates the amount of current income a bond provides relative to its market price. It is shown as: Coupon Rate divided by Price multiplied by 100%.Custody of Securities: Registration of securities in the name of the person to whom a bank is accountable, or in the name of the bank’s nominee; plus deposition of securities in a designated account with the bank’s bankers or with any other institution providing custodial services.

Debit Card: A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account. Many banks issue Debit-Cum-ATM Cards.Debtor: A person who takes some money on loan from another person.Demand Deposits: Deposits which are withdrawn on demand by customers. E.g. savings bank and current account deposits.Demat Account: Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the

Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.Derivative Call (Put) Warrants: Warrants issued by a third party which grant the holder the right to buy (sell) the shares of a listed company at a specified price.Derivative Instrument: Financial instrument whose value depends on the value of another asset.Discount Bond: A bond selling below par, as interest in-lieu to the bondholders.Dishonour of Cheque: Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment. Default Risk: The possibility that a bond issuer will default ie, fail to repay principal and interest in a timely manner.Diversification: The inclusion of a number of different investment vehicles in a portfolio in order to increase returns or be exposed to less risk.Duration: A measure of bond price volatility, it captures both price and reinvestment risks to indicate how a bond will react to different interest rate environments.

Earnings: The total profits of a company after taxation and interest.Earnings per Share (EPS): The amount of annual earnings available to common stockholders as stated on a per share basis.Earnings Yield: The ratio of earnings to price (E/P). The reciprocal is price earnings ratio (P/E).E-Banking : E-Banking or electronic banking is a form of banking where funds are transferred through exchange of electronic signals between banks and financial institution and customers ATMs, Credit Cards, Debit Cards, International Cards, Internet Banking and new fund transfer devices like SWIFT, RTGS belong to this category.EFT - (Electronic Fund Transfer): EFT is a device to facilitate automatic transmission and processing of messages as well as funds from one bank branch to another bank branch and even from one branch of a bank to a branch of another bank. EFT allows transfer of funds electronically with debit and credit to relative accounts.Either or Survivor: Refers to operation of the account opened in two names with a bank. It means that any one of the account holders have powers to withdraw money from the account, issue cheques, give stop payment instructions etc. In the event of death of one of the account holder, the surviving account holder gets all the powers of operation.Electronic Commerce (E-Commerce): E-Commerce is the paperless commerce where the exchange of business takes place by Electronic means.Endorsement: When a Negotiable Instrument contains, on the back of the instrument an

endorsement, signed by the holder or payee of an order instrument, transferring the title to the other person, it is called endorsement.Bouncing of a cheque: Where the name of the endorsee or transferee is not mentioned on the instrument.Endorsement in Full: Where the name of the endorsee or transferee appears on the instrument while making endorsement.Equity: Ownership of the company in the form of shares of common stock.Equity Call Warrants: Warrants issued by a company which give the holder the right to acquire new shares in that company at a specified price and for a specified period of time.Ex-dividend (XD): A security which no longer carries the right to the most recently declared dividend or the period of time between the announcement of the dividend and the payment (usually two days before the record date). For transactions during the ex-dividend period, the seller will receive the dividend, not the buyer. Ex-dividend status is usually indicated in newspapers with an (x) next to the stock’s or unit trust’s name.Execution of Documents: Execution of documents is done by putting signature of the person, or affixing his thumb impression or putting signature with stamp or affixing common seal of the company on the documents with or without signatures of directors as per articles of association of the company.

Face Value/ Nominal Value: The value of a financial instrument as stated on the instrument. Interest is calculated on face/nominal value.Fixed-income Securities: Investment vehicles that offer a fixed periodic return.Fixed Rate Bonds: Bonds bearing fixed interest payments until maturity date.Floating Rate Bonds: Bonds bearing interest payments that are tied to current interest rates.Factoring: Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.Foreign Banks: Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.Forfeiting: In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.Forgery: when a material alteration is made on a document or a Negotiable Instrument like a cheque,

to change the mandate of the drawer, with intention to defraud.Fundamental Analysis: Research to predict stock value that focuses on such determinants as earnings and dividends prospects, expectations for future interest rates and risk evaluation of the firm.Future Value: The amount to which a current deposit will grow over a period of time when it is placed in an account paying compound interest.Future Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will grow over a period of time when it is placed in an account paying compound interest.Futures Contract: A commitment to deliver a certain amount of some specified item at some specified date in the future.

Garnishee Order: When a Court directs a bank to attach the funds to the credit of customer's account under provisions of Section 60 of the Code of Civil Procedure, 1908.General Lien: A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt.Guarantee: A contract between guarantor and beneficiary to ensure performance of a promise or discharge the liability of a third person. If promise is broken or not performed, the guarantor pays contracted amount to the beneficiary.

Hedge: A combination of two or more securities into a single investment position for the purpose of reducing or eliminating risk.Holder: Holder means any person entitled in his own name to the possession of the cheque, bill of exchange or promissory note and who is entitled to receive or recover the amount due on it from the parties. For example, if I give a cheque to my friend to withdraw money from my bank,he becomes holder of that cheque. Even if he loses the cheque, he continues to be holder. Finder cannot become the holder.Holder in due course : A person who receives a Negotiable Instrument for value, before it was due and in good faith, without notice of any defect in it, he is called holder in due course as per Negotiable Instrument Act. In the earlier example if my friend lends some money to me on the basis of the cheque, which I have given to him for encashment, he becomes holder-in-due course.Hypothecation: Charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. In pledge, possession of property is passed on to the lender but in hypothecation, the property remains with the borrower in trust for the lender.

Identification: When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.Indemnifier: When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others' actions.Indemnity: Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.Income: The amount of money an individual receives in a particular time period.Index Fund: A mutual fund that holds shares in proportion to their representation in a market index, such as the S&P 500.Initial Public Offering (IPO): An event where a company sells its shares to the public for the first time. The company can be referred to as an IPO for a period of time after the event.Inside Information: Non-public knowledge about a company possessed by its officers, major owners, or other individuals with privileged access to information.Insider Trading: The illegal use of non-public information about a company to make profitable securities transactionsInsolvent: Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.Interest Warrant: When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.International Banking: involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.Introduction: Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.Intrinsic Value: The difference of the exercise price over the market price of the underlying asset.Investment: A vehicle for funds expected to increase its value and/or generate positive returns.Investment Adviser: A person who carries on a business which provides investment advice with respect to securities and is registered with the relevant regulator as an investment adviser.IPO price: The price of share set before being traded on the stock exchange. Once the company has gone

Initial Public Offering, the stock price is determined by supply and demand.

JHF Account : Joint Hindu Family Account is account of a firm whose business is carried out by Karta of the Joint family, acting for all the family members.. The family members have common ancestor and generally maintain a common residence and are subject to common social, economic and religious regulations.Joint Account: When two or more individuals jointly open an account with a bank.Junk Bond: High-risk securities that have received low ratings (i.e. Standard & Poor’s BBB rating or below; or Moody’s BBB rating or below) and as such, produce high yields, so long as they do not go into default.

Karta: Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.Kiosk Banking: Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.KYC Norms: Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.

Law of Limitation: Limitation Act of 1963 fixes the limitation period of debts and obligations including banks loans and advances. If the period fixed for particular debt or loan expires, one cannot file a suit for is recovery, but the fact of the debt or loan is not denied. It is said that law of limitation bars the remedy but does not extinguish the right.Lease Financing: Financing for the business of renting houses or lands for a specified period of time and also hiring out of an asset for the duration of its economic life. Leasing of a car or heavy machinery for a specific period at specific price is an example.Letter of Credit: A document issued by importers bank to its branch or agent abroad authorizing the payment of a specified sum to a person named in Letter of Credit (usually exporter from abroad). Letters of Credit are covered by rules framed under Uniform Customs and Practices of Documentary Credits framed by International Chamber of Commerce in Paris.Limited Companies Accounts: Accounts of companies incorporated under the Companies Act, 1956 . A company may be private or public. Liability of the shareholders of a company is generally limited to the face value of shares held by them.Leverage Ratio: Financial ratios that measure the amount of debt being used to support operations and the ability of the firm to service its debt.Libor: The London Interbank Offered Rate (or LIBOR) is a daily reference rate based on the interest rates at

which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market). The LIBOR rate is published daily by the British Banker’s Association and will be slightly higher than the London Interbank Bid Rate (LIBID), the rate at which banks are prepared to accept deposits.Limit Order: An order to buy (sell) securities which specifies the highest (lowest) price at which the order is to be transacted.Limited Company: The passive investors in a partnership, who supply most of the capital and have liability limited to the amount of their capital contributions.Liquidity: The ability to convert an investment into cash quickly and with little or no loss in value.Listing: Quotation of the Initial Public Offering company’s shares on the stock exchange for public trading.Listing Date: The date on which Initial Public Offering stocks are first traded on the stock exchange by the public

Margin Call: A notice to a client that it must provide money to satisfy a minimum margin requirement set by an Exchange or by a bank / broking firm.Market Capitalization: The product of the number of the company’s outstanding ordinary shares and the market price of each share.Market Maker: A dealer who maintains an inventory in one or more stocks and undertakes to make continuous two-sided quotes.Market Order: An order to buy or an order to sell securities which is to be executed at the prevailing market price.Money Market: Market in which short-term securities are bought and sold.Marginal Standing Facility Rate: MSF scheme has become effective from 09th May, 2011 launched by the RBI. Under this scheme, Banks will be able to borrow upto 1% of their respective Net Demand and Time Liabilities. The rate of interest on the amount accessed from this facility will be 100 basis points (i.e. 1%) above the repo rate. This scheme is likely to reduce volatility in the overnight rates and improve monetary transmission.Mandate: Written authority issued by a customer to another person to act on his behalf, to sign cheques or to operate a bank account.Material Alteration: Alteration in an instrument so as to alter the character of an instrument for example when date, amount, name of the payee are altered or making a cheque payable to bearer from an order one or opening the crossing on a cheque.Merchant Banking : When a bank provides to a customer various types of financial services like accepting bills arising out of trade, arranging and providing underwriting, new issues, providing advice,

information or assistance on starting new business, acquisitions, mergers and foreign exchange.Micro Finance: Micro Finance aims at alleviation of poverty and empowerment of weaker sections in India. In micro finance, very small amounts are given as credit to poor in rural, semi-urban and urban areas to enable them to raise their income levels and improve living standards.Minor Accounts: A minor is a person who has not attained legal age of 18 years. As per Contract Act a minor cannot enter into a contract but as per Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive payment on a Negotiable Instrument so as to bind all the persons, except himself. In order to boost their deposits many banks open minor accounts with some restrictions.Mobile Banking : With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates.Money Laundering: When a customer uses banking channels to cover up his suspicious and unlawful financial activities, it is called money laundering. Money Market: Money market is not an organized market like Bombay Stock Exchange but is an informal network of banks, financial institutions who deal in money market instruments of short term like CP, CD and Treasury bills of Government.Moratorium: R.B.I. imposes moratorium on operations of a bank; if the affairs of the bank are not conducted as per banking norms. After moratorium R.B.I. and Government explore the options of safeguarding the interests of depositors by way of change in management, amalgamation or take over or by other means.Mortgage: Transfer of an interest in specific immovable property for the purpose of offering a security for taking a loan or advance from another. It may be existing or future debt or performance of an agreement which may create monetary obligation for the transferor (mortgagor).Mutual Fund: A company that invests in and professionally manages a diversified portfolio of securities and sells shares of the portfolio to investors.

NABARD: National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.Negotiation: In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.

Net Asset Value: The underlying value of a share of stock in a particular mutual fund; also used with preferred stock.Non-Fund Based Limits: Non-Fund Based Limits are those type of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.Non-Resident: A person who is not a resident of India is a non-resident. Non-Resident Accounts: Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.Notary Public: A Lawyer who is authorized by Government to certify copies of documents .NPA Account: If interest and instalments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.

Off Balance Sheet Items: Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.Offer for Sale: An offer to the public by, or on behalf of, the holders of securities already in issue.Offer for Subscription: The offer of new securities to the public by the issuer or by someone on behalf of the issuer.Online Banking: Banking through internet site of the bank which is made interactive.Open-end (Mutual) Fund: There is no limit to the number of shares the fund can issue. The fund issues new shares of stock and fills the purchase order with those new shares. Investors buy their shares from, and sell them back to, the mutual fund itself. The share prices are determined by their net asset value.Open Offer: An offer to current holders of securities to subscribe for securities whether or not in proportion to their existing holdings.Option: A security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.Oversubscribed: When an Initial Public Offering has more applications than actual shares available. Investors will often apply for more shares than required in anticipation of only receiving a fraction of the requested number. Investors and underwriters will often look to see if an IPO is oversubscribed as an indication of the public’s perception of the business potential of the IPO company.

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

Par Bond: A bond selling at par (i.e. at its face value).Par Value: The face value of a security.Perpetual Bonds: Bonds which have no maturity date.Placing: Obtaining subscriptions for, or the sale of, primary market, where the new securities of issuing companies are initially sold.Personal Identification Number (PIN): Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .Plastic Money: Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.Pledge: A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.Post-Dated Cheque: A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.Power of Attorney: It is a document executed by one person - Donor or Principal, in favour of another person, Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.Portfolio: A collection of investment vehicles assembled to meet one or more investment goals.Preference Shares: A corporate security that pays a fixed dividend each period. It is senior to ordinary shares but junior to bonds in its claims on corporate income and assets in case of bankruptcy.Premium (Warrants): The difference of the market price of a warrant over its intrinsic value.Premium Bond: Bond selling above par.Present Value: The amount to which a future deposit will discount back to present when it is depreciated in an account paying compound interest.Present Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will discount back to present when it is depreciated in an account paying compound interest.Price/Earnings Ratio (P/E): The measure to determine how the market is pricing the company’s common stock. The price/earnings (P/E) ratio relates the company’s earnings per share (EPS) to the market price of its stock.Privatization: The sale of government-owned equity in nationalized industry or other commercial enterprises to private investors.Prospectus: A detailed report published by the Initial Public Offering company, which includes all terms and conditions, application procedures, IPO prices etc, for the IPO

Put Option: The right to sell the underlying securities at a specified exercise price on of before a specified expiration date.Premature Withdrawals: Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.Prime Lending Rate (PLR): The rate at which banks lend to their best (prime) customers.Priority Sector Advances : consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organisations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.Promissory Note: Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.Provisioning: Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification and make appropriate provisions for likely losses in their balance sheets.Public Sector Bank: A bank fully or partly owned by the Government.

Rate of Return: A percentage showing the amount of investment gain or loss against the initial investment.Real Interest Rate: The net interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.Redemption Value: The value of a bond when redeemed.Reinvestment Value: The rate at which an investor assumes interest payments made on a bond which can be reinvested over the life of that security.Relative Strength Index (RSI): A stock’s price that changes over a period of time relative to that of a market index such as the Standard & Poor’s 500, usually measured on a scale from 1 to 100, 1 being the worst and 100 being the best.Repurchase Agreement: An arrangement in which a security is sold and later bought back at an agreed price and time.Resistance Level: A price at which sellers consistently outnumber buyers, preventing further price rises.Return: Amount of investment gain or loss.Rescheduling of Payment: Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.Restrictive Endorsement: Where endorser desires that instrument is to be paid to particular person only,

he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.Right of Appropriation: As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.Rights Issue: An offer by way of rights to current holders of securities that allows them to subscribe for securities in proportion to their existing holdings.Risk-Averse, Risk-Neutral, Risk-Taking:Risk-averse describes an investor who requires greater return in exchange for greater risk.Risk-neutral describes an investor who does not require greater return in exchange for greater risk.Risk-taking describes an investor who will accept a lower return in exchange for greater risk.

Safe Custody: When articles of value like jewellery, boxes, shares, debentures, Government bonds, Wills or other documents or articles are given to a bank for safe keeping in its safe vault, it is called safe custody.. Bank charges a fee from its clients for such safe custody.Savings Bank Account: All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account.Senior Bond: A bond that has priority over other bonds in claiming assets and dividends.Settlement: Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivered, securities sold, and receive from the broker the proceeds of a sale.Short Hedge: A transaction that protects the value of an asset held by taking a short position in a futures contract.Short Position: Investors sell securities in the hope that they will decrease in value and can be bought at a later date for profit.

Short Selling: The sale of borrowed securities, their eventual repurchase by the short seller at a lower price and their return to the lender.Speculation: The process of buying investment vehicles in which the future value and level of expected earnings are highly uncertain.Stock Splits: Wholesale changes in the number of shares. For example, a two for one split doubles the number of shares but does not change the share capital.Subordinated Bond: An issue that ranks after secured debt, debenture, and other bonds, and after some general creditors in its claim on assets and earnings. Owners of this kind of bond stand last in line among creditors, but before equity holders, when an issuer fails financially.Substantial Shareholder: A person acquires an interest in relevant share capital equal to, or exceeding, 10% of the share capital.Support Level: A price at which buyers consistently outnumber sellers, preventing further price falls.

Teller : Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.Technical Analysis: A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future (usually short-term) market trends. Contrasted with fundamental analysis which involves the study of financial accounts and other information about the company. (It is an attempt to predict movements in security prices from their trading volume history.)Time Horizon: The duration of time an investment is intended for.Trading Rules: Stipulation of parameters for opening and intra-day quotations, permissible spreads according to the prices of securities available for trading and board lot sizes for each security.Trust Deed: A formal document that creates a trust. It states the purpose and terms of the name of the trustees and beneficiaries.

Underwriting : is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.Underlying Security: The security subject to being purchased or sold upon exercise of the option contract.Universal Banking : When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance,

foreign exchange business, insurance etc. it is called Universal Banking.

Valuation: Process by which an investor determines the worth of a security using risk and return concept.Virtual Banking: Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's World Wide Web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.

Warrant: An option for a longer period of time giving the buyer the right to buy a number of shares of common stock in company at a specified price for a specified period of time.Wholesale Banking: Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients.Window Dressing: Financial adjustments made solely for the purpose of accounting presentation, normally at the time of auditing of company accounts.

Yield (Internal rate of Return): The compound annual rate of return earned by an investmentYield to Maturity: The rate of return yield by a bond held to maturity when both compound interest payments and the investor’s capital gain or loss on the security are taken into account.

Zero Coupon Bond: A bond with no coupon that is sold at a deep discount from par value.

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Open Market operations(OMO):The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system by RBI. Open market operations are the principal tools of monetary policy. Micro Credit:It is a term used to extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families. RTGS:The acronym ‘RTGS’ stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a ‘real time’ and on‘gross’ basis. This is the fastest possible money transfer system through the banking

channel.Settlement in ‘real time’ means payment transaction is not subjected to any waiting period.The transactions are settled as soon as they are processed. ‘Gross settlement’ means the transaction is settled on one to one basis without bunching with any other transaction. Wholesale Price Index(WPI):The Wholesale Price Index (WPI) is the index used to measure the changes in the average price level of goods traded in wholesale market. A total of 435 commodity prices make up the index. It is available on a weekly basis. It is generally taken as an indicator of the inflation rate in the Indian economy. The Indian Wholesale Price Index (WPI) was first published in 1902, and was used by policy makers until it was replaced by the Producer Price Index (PPI) in 1978. Consumer price Index(CPI):It is a measure estimating the average price of consumer goods and services purchased by households. Venture Capital:Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a loan, and the investor hopes the investment will yield a better-than-average return. Treasury Bills:Treasury Bills (T-Bills) are short term, Rupee denominated obligations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are thus useful in managing short-term liquidity. At present, the Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments. Banking Ombudsmen 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 is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. The Banking Ombudsman Scheme was first introduced in India in 1995, and was revised in 2002. The current scheme became operative from the 1 January 2006, and replaced and superseded the banking Ombudsman Scheme 2002. Subsidy:A subsidy is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or to encourage it to hire more labor.

Debenture: A debenture is basically an unsecured loan to a corporation. A type of debt instrument that is not secured by physical asset. Debentures are backed only by the general creditworthiness and reputation of the issuer.i)Convertible Debentures: Any type of debenture that can be converted into some other security or it can be converted into stock..ii)Non-Convertibility Debentures(NCB): Non Convertible Debentures are those that cannot be converted into equity shares of the issuing company, as opposed to Convertible debentures. Nonconvertible debentures normally earn a higher interest rate than convertible debentures do. Hedge fund:Hedge means to reduce financial risk. A hedge fund is an investment fund open to a limited range of investors and requires a very large initial minimum investment. It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. FCCB:A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued in a currency different than the issuer’s domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A company may issue an FCCB if it intends to make a large investment in a country using that foreign currency. Capital Account Convertibility(CAC): It is the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. This means that capital account convertibility allows anyone to freely move from local currency into foreign currency and back. The Reserve Bank of India has appointed a committee to set out the framework for fuller Capital Account Convertibility. Capital account convertibility is considered to be one of the major features of a developed economy. It helps attract foreign investment. capital account convertibility makes it easier for domestic companies to tap foreign markets. Current Account Convertibility:It defines at one can import and export goods or receive or make payments for services rendered. However, investments and borrowings are restricted. Arbitrage:The opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price. Capitalism:Capitalism as an economy is based on a democratic political ideology and produces a free market economy, where businesses are privately owned and operated for profit; in capitalism, all of the capital investments and decisions about production, distribution, and the prices of goods, services, and labor, are determined in the free

market and affected by the forces of supply and demand. Socialism:Socialism as an economy is based on a collectivist type of political ideology and involves the running of businesses to benefit the common good of a vast majority of people rather than of a small upper class segment of society. Corporate governance: The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled.Is defined as the general set of customs, regulations, habits, and laws that determine to what end a firm should be run. Functions of RBI:The Reserve Bank of India is the central bank of India, was established on April 1, 1935 inaccordance with the provisions of the Reserve Bank of India Act, 1934. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.To regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.Banker to banks: maintains banking accounts of all scheduled banks. Monetary policy:A Monetary policy is the process by which the government, central bank, of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy. Fiscal Policy:Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine public revenue and public expenditure. Core Banking Solutions:Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. It will cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions

E-Governance: E-Governance is the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable,transparent and effective. 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 overnments.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 13 October 2005. Credit Rating Agencies:The credit rating agencies in India mainly include ICRA and CRISIL. ICRA wasformerly referred to the Investment Information and Credit Rating Agency of India Limited. Their main function is to grade the different sector and companies in terms of performance and offer solutions for up gradation. The credit rating agencies in India mainly include ICRA and CRISIL(Credit Rating Information Services of India Limited) Cheque:Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the maker/depositor’s name with that Bank.A bill of exchange drawn on a specified banker and payable on demand.“Written order directing a bank to pay money”. Demand Draft:A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft both are used for Transfer of money. You can 100% trust a DD. It is a banker’s check. A check may be dishonored for lack of funds a DD can not. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than individuals. NBFC: A non-banking financial company (NBFC) is a company registered under theCompanies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government, but does not include any institution whose principal business is that of agriculture activity, industrial activity,sale/purchase/construction of immovable property.NBFCs are doing functions akin to that of banks; however there are a few differences:(i)A NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand — immediately or within a very short period — like your current or savings accounts.)(ii) it is not a part of the payment and settlement system and as such cannot issue cheques to

its customers; and(iii) Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks. NASSCOM:The National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce is a consortium that serves as an interface to the Indian software industry and Indian BPO industry. Maintaining close interaction with the Government of India in formulating National IT policies with specific focus on IT software and services maintaining a state of the art information database of IT software and services related activities for use of both the software developers as well as interested companies overseas. SIDBI: The Small Industries Development Bank of India 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. 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. 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 beingpassed by the Indian Parliament. Chaired by C B Bhave. ASSOCHAM: The Associated Chambers of Commerce and Industry of India (ASSOCHAM), India’s premier apex chamber covers a membership of over 2 lakh companies and professionals across the country. It was established in 1920 by promoter chambers, representing all regions of India. As an apex industry body, ASSOCHAM represents the interests of industry and trade, interfaces with Government on policy issues and interacts with counterpart international organizations to promote bilateral economic issues. President-Swati Piramal 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. 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. Asset Management Companies: 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. Non-perfoming assets:Non-performing assets, also called non-performing loans, are loans,made by a bank or finance company, on which repayments or interest payments are not being made on time. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.

Active MarketThis is a term used by stock exchange which specifies the particular stock or share which deals in frequent and regular transactions. It helps the buyers to obtain reasonably large amounts at any time.

Administered PriceThe administrative body e.g., the government a marketing board or a trading group determines this price. The competitive market force are not entitled to determine this price. The government fixes a price in accordance with demand supply portion in the market.

Ad-valorem TaxAd-valorem tax is a kind of indirect tax in which goods are taxed by their values. In the case of ad-volorem tax, the tax amount is calculated as the

proportion of the price of the goods. Value added Tax (VAT) is an ad-volorem Tax.

Advanced CountriesAdvanced countries are countries which are industrially advanced, having high national and per capita income and ensure high rate of capital formation. These countries possess highly developed infrastructure and apply most updated and advanced technical know-how in their productive activities. A strong and well organised financial structure is found in these advanced countries.

AmalgamationIt means ‘merger’. As and when necessity arises two or more companies are merged into a large organisation. This merger takes place in order to effect economies, reduce competition and capture market. The old firms completely lose their identity when the merger takes place.

AppreciationAppreciation means an increase in the value of something e.g., stock of raw materials or manufactured goods. It also includes an increase in the traded value of a currency. It is the antonym of Depreciation. When the prices rise due to inflation, appreciation may occur. It causes scarcity or increase in earning power.

ArbitrageWhen a person performs functions of middle man and buys and sells goods at a particular time to cash the price differences of two markets, this action is termed as arbitrage. Purchases are made in the market where price is low and at the same time, goods are sold in other market where the price are high. Thus the middleman earns profit due to price difference in two markets.

ArbitrationWhere there is an industrial dispute, the Arbitration comes to the force. The judgement is given by the Arbitrator. Both the parties have to accept and honour the Arbitration. Arbitration is the settlement of labour disputes that takes place between employer and the employees.

Auction

When a commodity is sold by auction, the bids are made by the buyers. Whose ever makes the highest bid, gets the commodity which is being sold. The buyers make the bidtaking into consideration the quality and quantity of the commodity.

AutarchyIf a country is self-sufficient, it does not require the imports for the country. Autarchy is an indicator of self-sufficiency. It means that the country itself can satisfy the needs of its population without making imports from other countries.

Balanced BudgetWhen the total revenue of the government exactly equals the total expenditure incurred by the government, the budget becomes a balanced budget. But it is a conservative view point. In present days, the welfare government has to regulate a number of economic and social activities which increase the expenditure burden on the government and results in deficit budget.

Balance of PaymentBalance of payment of a country is a systematic record of all economic transactions completed between its residents and the residents of remaining world during a year. In other words, the balance of payment shows the relationship between the one country's total payment to all other countries and its total receipts from them. Balance of payment is a comprehensive term which includes both visible and invisible items. Balance of payment not only include visible export and imports but also invisible trade like shipping, banking, insurance, tourism, royalty, payments of interest on foreign debts.

Balance of TradeBalance of trade refers to the total value of a country's export commodities and total value of imports commodities. Thus balance of trade includes only visible trade i.e., movement of goods (exports and imports of goods). Balance of trade is a part of Balance of payment statement.

Balance Sheet

Balance sheet is a statement showing the assets and liabilities of a business at a certain date. Balance sheet helps in estimating the real financial situation of a firm.

BankBank is a financial institution. It accepts funds on current and deposit accounts. It also lends money. The bank pays the cheques drawn by customers against current and deposits accounts. The bank is a trader that deals in money and credit.

Bank DraftBanker's draft is a negotiable claim drawn upon a bank. Drafts are as good as cash. The drafts cannot be returned and unpaid. Draft is issued when a customer shows his unwillingness to accept cheque in payment for his services or mercantile goods. Bank Draft is safer than a cheque.

Bank RateBank Rate is the rate of discount at which the central bank of the country discounts first class bills. It is the rate of interest at which the central bank lends money to the lower banking institutions. Bank rate is a direct quantitative method of credit control in the economy.

BilateralismIt implies an agreement between two countries to extend to each other specific privileges in their international trade which are not extended to others.

Birth RateBirth Rate (or Crude Birth Rate) is number of the births per thousand of the population during a period, usually a year. Only live births are included in the calculation of birth rate.

Black MoneyIt is unaccounted money which is concealed from tax authorities. All illegal economic activities are dealt with this black Money. Hawala market has deep roots with this black money. Black money creates parallel economy. It puts an adverse pressure on equitable distribution of wealth and income in the economy.

Blue ChipIt is concerned with such equity shares whose purchase is extremely safe. It is a safe investment. It

does not involve any risk.

Blue Collar JobsThese Jobs are concerned with factory. Persons who are unskilled and depend upon manual jobs that require physical strain on human muscle are said to be engaged in Blue Collar Jobs. In the age of machinery, such Jobs are on the decline these days.

Brain-DrainIt means the drift of intellectuals of a country to another country. Scientists, doctors and technology experts generally go to other prominent countries of the world to better their lot and earn huge sums of money. This Brain-Drain deprives a country of its genius and capabilities.

Bridge LoanA loan made by a bank for a short period to make up for a temporary shortage of cash. On the part of borrower, mostly the companies for example, a business organization wants to install a new company with new equipments etc. while his present installed company / equipments etc. are not yet disposed off. Bridge loan covers this period between the buying the new and disposing of the old one.

BudgetIt is a document containing a preliminary approved plan of public revenue and public expenditure. It is a statement of the estimated receipt and expenses during a fixed period, it is a comparative table giving the accounts of the receipts to be realized and of the expenses to be incurred.

Budget DeficitBudget may take a shape of deficit when the public revenue falls short to public expenditure. Budget deficit is the difference between the estimated public expenditure and public revenue. The government meets this deficit by way of printing new currency or by borrowing.

BullBull is that type of speculator who gains with the rise in prices of shares and stocks. He buys share or commodities in anticipation of rising prices and sells them later at a profit.

Bull MarketIt is a market where the speculators buy shares or commodities in anticipation of rising prices. This market enables the speculators to resale such shares and make a profit.

BuoyancyWhen the government fails to check inflation, it raises income tax and the corporate tax. Such a tax is called Buoyancy. It concerns with the revenue from taxation in the period of inflation.

Business CycleBusiness cycle (also known as trade cycle) are species of fluctuations in the economic activity of organised communities. It is composed of period of good trade characterisedby rising prices and low unemployment, alternating with period of bad trade characterised by falling prices and high unemployment. Every trade cycle have five different subphases–depression, recovery, full employment, prosperity (boom) and recession.

Call MoneyCall money is in the form of loans and advances which are payable on demand or within the number of days specified for the purpose.

Capital BudgetingCapital budgeting represents the process of preparing budget for a period of a year or even for several years allocating capital outlays for the various investment projects. In other words, it is the process of budgeting capital expenditure by means of an annual or longer period capital budget.

Capital-labour RatioLatest models of machinery and equipment raise the labour efficiency and the output is maximized. Capitallabour ratio is the amount of capital against the given labours that a firm employs. Capital-labour ratio is the ratio of capital to labour.

Capital MarketCapital market is the market which gives medium term and long term loans. It is different from money market which deals only in short term loans.

Capitalism

Capitalism is an economic system in which all means of production are owned by private individuals Selfprofit motive is the guiding feature for all the economic activates under capitalism. Under pure capitalism system economic conditions are regulated solely by free market forces. This system is based on ‘Laissez-faire system’ i.e., no state intervention. Sovereignty of consumer prevails in this system. Consumer behaves like a king under capitalism.

Cash Reserve Ratio (CRR)The commercial banks are required to keep a certain amount of cash reserves at the central bank. This percentage amount is called CRR. It influences the commercial bank’s volume of credit because variation in CRR affects the liquidity position of the banks and hence their ability to lend.

CensusCensus gives us estimates of population. Census is of great economic importance for the country. It tells us the rate at which the total population is increasing among different age groups. In India census is done after every 10 years. The latest census in India has been done in 2001.

Central BankCentral Bank may be defined as the apex barking and monetary institution whose main function is to control, regulate and stabilize the banking and the monetary system of the country in the national interest.

ChequeCheque is an order in writing issued by the drawer to a bank. If the customer has sufficient amount in his account, the cheque is paid by the bank. Cheques are used in place of cash money.

Clearing BankClearing bank is one which settles the debits and credits of the commercial banks. Even of the cash balances are lesser, clearing bank facilitates banking operation of the commercial bank.

Clearing HouseClearing house is an institution which helps to settle the mutual indebtedness that occurs among the

members of its organisation.

Closed EconomyClosed economy refers to the economy having no foreign trade (i.e., export and import). Such economies depend exclusively on their own internal domestic resources and haveno dependence on outside world.

CollusionProducers of an industry reduce competition among themselves to raise their profits. They fix the price themselves with a clear understanding in this regard. This understanding among different firms is called collusion.

CoinageArt and practice of making coins is called coinage. The metal is melted and moulded to shape into a coin. The coinage is a medium of exchange (money).

CollectivismCollectivism is a belief that nation's interest is superior to individual interest. This is the collective thinking of the society and polity national leaders and also communist opine the theory of collection.

Commercial BankCommercial Bank is an institution of finance. It deals with the banking services through its branches in whole of the country. Operation of current accounts, deposits, granting of loans to individuals and companies etc. are various functions of the commercial bank.

Communism

Communism is a political and economic system in which the state makes the major economic decision State owns the bulk of capital assets. Responsibility for production and distribution lies with the state in this system.

Core SectorEconomy needs basic infrastructure for accelerating development. Development of infrastructure industries like cement, iron and steel, petroleum, heavy machinery etc. can only ensure the development of the economy as a whole. Such industries are core sector industries.

Corporation Tax

It is a tax on company's profit. It is a direct tax which is calculated on profits after interest payments and allowance (i.e., Capital allowance) have been deducted but before dividends are allowed for.

Cost-push InflationIt arises due to an increase in production cost. Such type of inflation is caused by three factors : (i) an increase in wages, (ii) an increase in the profit margin and (iii) imposition of heavy taxation.

Credit RationingCredit rationing takes place when the banks discriminates between the borrowers. Credit rationing empowers the bank to lend to some and to refuse to lend to others. In this way credit rationing restricts lending on the part of bank.

Credit SqueezeMonetary authorities restrict credit as and when required. This credit restriction is called credit squeeze. Monetary authorities adopt the policy of credit squeeze to control inflationary pressure in the economy.

Custom DutyCustom duty is a duty that is imposed on the products received from exporting nations of the world. It is also called protective duty as it protects the home industries.

Cyclical UnemploymentIt is that phase of unemployment which appears due to the occurrence of the downward phase of the trade cycle. Such an employment is reduced or eliminated when the businesscycle turns up again.

Dear MoneyDear money is that money which can only be borrowed at a high rate of interest. In dear money policy, bank rate and other rates of interest are high and as a result borrowing becomes expensive. Dear money policy is deliberate policy which is adopted by the monetary authorities to check inflation in the economy.

Death Duty

It is a direct tax which is imposed on the estate of

deceased person. Death duty or Death Tax is a form of personal tax on property which is levied when property passes from one person to other at the time of death of the former.

Death RateDeath rate signifies the number of deaths in a year per thousand of the population. It is mostly known as crude death rate. Life expectancy is important determinant of death rate.A country having high life expectancy will have a high crude death rate.

DecentralisationDecentralisation means the establishment of various unit of the same industry at different places. Large scale organisation or industry can not be run at one particular place or territory. In order to increase the efficiency of the industry, various units at different places are located.

Debt Service (Total)The sum of principal repayments and interest actually paid in foreign currency, goods and services on longterm debt (having maturity of more than one year), interest paid on shortterm debt and repayments to IMF.

Deficit FinancingIt is a practice resorted to by modern government of spending more money than it receives in revenue. It is a policy of bridging a deficit between governments expenditure and revenue. Deliberately budgeting for a deficit is called deficit financing. This practice was popularised by Prof. J. M. Keynes to deal with the depression and unemployment situations and to stimulate economic activity. Deficit financing, though having inflationary effects, has now become a common practice in all countries.

DeflationDeflation is the reverse case of inflation. Deflation is that state of falling prices which occurs at that time when the output of goods and services increases more rapidly than the volume of money in the economy. In the deflation the general price level falls and the value of money rises.

DevaluationThe loss of value of currency of a country relative to

other foreign currency is known as devaluation. Devaluation is a process in which the government deliberately cheapens the exchange value of its own currency in terms of other currency by giving it a lower exchange value. Devaluation is used for improving, the balance of payment situation in the country.

Direct TaxA tax is said to be a direct tax when it is not intended to be shifted to anybody else. The person who pays it in the first instance is also excepted to bear it. Thus the impact and incidence of direct tax fall on the same person shifting of direct tax is not possible Income Tax is a example of direct tax.

Disinflation

It refers to a process of bringing down prices moderately from their high level without any adverse impact on production and employment. Thus, disinflation is an anti-inflationary measure.

DissavingDissaving occurs when expenditure exceeds income. Raising of loans or utilization of past accumulated savings takes place in such eventuality.

DividendDividend is the amount which the company distributes to shareholders when the profits of the company are calculated by the board of directors.

Economic IntegrationEconomic integration appears when two or more nations coordinate themselves and their economies are linked up. It may exhibit itself in the form of free trade area or a full economic union. EEC is an example of economic integration.

Engel's LawThis law was formulated by Ernst Engel. This law states that, with given taste and preference, the portion of income spend on food diminishes as income increases. According to this law, smaller a person's income, the greater the proportion of it that he will spend on food and vice versa.

Estate DutyIt is a tax which is levied on the estate of a decreased person. It is also known as death duty. The

ownership of state changes hands only after the payments of the estate duty. It is an progressive tax in nature.

Excise DutyIt is a tax which is imposed on certain indigenous production (e.g., petroleum products, cigarettes etc.) of the country. Excise duty may be imposed either to raise revenue or to check the consumption of the commodities on which they are imposed. Excise duty is progressive in nature.

Face ValueIt refers to that normal value of coin at which the coin circulates and is accepted in the discharge of debit or obligation. Broadly speaking, the face value refers to domination stamped on a coin / or documents when it is issued. In securities, it refers to par value.

FascismIt is a form of political system. In it every economic consideration rests on one criterion—the increase in the people's standard of living. It also lays emphasis on militarystrength and prestige of the country. It is the extreme nationalism and the ultimate goal is self-sufficiency.

Federal EconomyIt refers to a federation which is an association of two and more states. A federal state is a union of state in which authority is divided between the federal (or central) government and the state governments. In a federal economy both the centre and the states are independent in the exercise of this authority.

Fiduciary IssueGenerally bank-note are backed by gold. But when they are not backed by gold and government securities replace gold, it is called fiduciary issue. Such fiduciary issue results in inflation.

Fertility RateThe term fertility refers to the actual bearing of children or ‘occurrence of births’. Fertility rate measures the average number of the live births per 1000 women. This rate is one of the most important and useful aids to population projection. It helps in assessing population trends in the economy.

Fiscal PolicyFiscal policy is that part of government

economic policy which deals with taxation, expenditure, borrowing, and the management of public debt in the economy. Fiscal policy primarily concerns itself with the flow of funds in the economy. Fiscal policy primarily concerns itself with the flow of funds in the economy. It exerts a very powerful influence on the working of economy as a whole.

GEMGEM (Gender Empowerment Measure) is a composite index measuring gender inequality in three basic dimensions of empowerment–economic participation and decision making, political participation and decision making, and power over economic resources.

GDIGDI (Gender Related Development Index) is a composite index measuring average achievement in the three basic dimensions captured in the human development index–a long and healthy life, knowledge and a decent standard of living–adjusted to account for inequalities between men and women.

Gini-coefficientIt represents the measurement of inequality derived from the ‘Lorenz Curve,’ with every increase in the degree of inequality, the curvature of the Lorenz Curve also increases andthe area between the curve and 45° line becomes larger.The Gini-coefficient is measured as—G =Area between Lorenz Curve & 45° Line/Area above the 45° Line

Giffin GoodsGiffin goods have the positive relationship between price and quantity demanded and as a result demand curve of Giffin goods slopes upward from left to right. This phenomenon was first observed by Sir Robert Giffin in relation to the demand for bread by poor labours.

Gresham's Law“Bad money (if not limited in quantity) drives good money out of circulation”—This statement was given by Sir Thomas Gresham, the economic Adviser of Queen Elizabeth. This law states that people always want to hoard good money and spend bad money when two forms of money are in circulation at the same time.

Gross Domestic Product (GDP)It is the money value of all final goods and services produced within the geographical boundaries of the country during a given period of time (usually a year). GDP can be calculated both at current prices and at constant prices. If we add net factor income from abroad to the GDP, we get ‘Gross National Product’ (GNP).

Gross National Product (GNP)It refers to the money value of total output or production of final goods and services produced by the nationals of a country during a given period of time, generally a year.

Gross National Product Deflator

It is a Price Index Number used to correct the money value of Gross National Product (GNP) for price changes so as to isolate the changes which have taken place in the physical output of goods and services.

Guild SocialismThis form of socialism accepts the leadership of artisans. The operation of the whole economy specially the management and control of industries lies in the hands of artisans Socialism established by artisans is termed a Guild Socialism.

HDIHDI (Human Development Index) is a composite index measuring average achievement in three basic dimensions of human life–a long and healthy life, knowledge and a decent standard of living.

Import DutyImport duty is a tax on imports imposed on an ad-valorem basis i.e., fixed in the form of a percentage on the value of the commodity imported.

Indirect TaxIndirect tax is that tax which is levied on goods or services produced or purchased. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense to another.

InflationA situation of a steady and sustained rise in general

prices is usually known as inflation. Inflation is a state in which the value of money is falling i.e., prices are rising.

Joint DemandJoint demand appears in case of complementary goods. When two commodities are complementary to one another and cannot be used separately, they have joint demand. Bread and butter, sugar and tea, pen and ink are a few examples of joint demand. In joint demand a change in demand of one commodity bring about the proportionate change in demand for the other.

Joint SectorWhen a sector is jointly owned, managed and run by both public and private sector, it is called joint sector. This sector indicates the partnership between the two i.e., public and private sector.

Labour Union

Labour union represents that organisation of workers which works for improving working condition of labours and also for raising their wage by adopting ‘collective bargaining’ measures with the management of the industry in particular.

Laffer CurveThis curve is given by American economist Prof. Arthur Laffer. It represents relationship between total tax revenue and corresponding tax rates.

Laissez FaireIt is a French word meaning ‘non-interference’. This doctrine was popularised by classical economists who gave the view that government should interfere as little as possible in the economic activities of the individuals.

Life Expectancy at Birth

The number of years a newborn infant would live if prevailing pattern of age specific mortality rates at the time of birth were to stay the same throughout the child’s life.

Liquidation

It refers to the termination (or winding up) of a registered company. Liquidation takes place because of company's insolvency. In liquidation, assets are turned into cash for settling outstanding debts and for apportioning the balance, if any, amongst the owners.

LiquidityAssets which can easily be converted into cash money are said to have liquidity. Land does not possess liquidity at it takes longer time to get converted into cash.

Liquidity RatioThe commercial banks under banking regulations have to maintain a certain specified proportion of their total deposits of various categories in liquid assets. This maintainable proportion is called liquidity ratio.

Lock-outLock-out refers to such a situation when the management does not permit the workers to work unless they agree to accept the employer's term. Lock-out is the closing of work by the management for an uncertain period of time to put pressure on the labour union. It is an action by the employer equivalent to a strike by employees.

Lorentz CurveThis curve shows the degree of inequalities of a frequency distribution in a graphical manner. It is a curve on a graph which shows the cumulative proportion of a statistical population against this cumulative share of some characteristic. This curve is commonly used to depict income distribution showing the cumulative percentage of people from the poorest up and their cumulative share of national income.

Lump Sum TaxLump sum tax is a fixed amount which has imperative nature irrespective of the income level. This tax is not equitable in nature.

Merit GoodsMerit goods refer those goods that are very essential to the society as a whole and hence the government ensures their availability to all consumers, regardless of their ability to pay to reasonable price.

Mixed EconomyIt refers to that economic system in which both private and public sector co-exists. Indian economy is an example of a mixed economy.

Monetary Policy

Monetary policy comprises all measures applied by the monetary authorities with a view to produce a deliberate impact on the nature and volume of money so as to achieve the objectives of general economic policy. It aims at regulating the flow of currency, credit and other money substitutes in an economy with a view to affect the total stock of such assets as well as to influence the demand of the community for such assets.Monetary ReformsWhen a new currency is introduced in a country due to hyperinflation or due to a deliberate policy measure (such as decimalization) it is termed as monetary reform.

MonopolyMonopoly refers to that market structure where there is only one seller in the market who controls the entire market supply and no substitute of the product is available in the market.

MonopsonyMonopsony is that market situation in which there is only one single buyer of the product in the market. In other word, ‘buyer's monopoly’ is termed as monopsony.

Multinational CompanyIt is a large scale company which has its production base in several countries and the bulk of the production is produced in outside nations. This company produces more overseasthan they do in its parent country. Increased trade and economies of scale have encouraged such type of companies in the recent years.

National IncomeIn the simplest way it can be defined as ‘factor income accruing to the national residents of a country.’ It is the sum of domestic factor income and net factor income earned from abroad. Net national product at factor cost is called national income.

Net National Product (NNP)

When depreciation is deducted from GNP i.e., Gross National Product, we get Net National Product (NNP).

OligopolyOligopoly is that form of imperfect competition in which there are only a few firms in the industry (or group) producing either homogeneous products or may be having product differentiation in a given line of production.

Open EconomyOpen economy is that economy which is left free and the government imposes no restrictions on trade with areas outside that economy.

Okun’s LawArthur Okun presented an empirical relationship between cyclical movements in GNP and unemployment. Okun found that an annual 2•5% increase in the rate of real growth above the trend growth results in a 1% decrease in the rate of unemployment. This relationship is known as Okun’s Law.

Perfect CompetitionPerfect competition is the market in which there are many firms selling identical products with no firm large enough relative to the entire market to be able to influence market price.

Poverty LinePoverty line is a virtual line demarcating persons living below and above it. In India all those persons are treated living below poverty line who are not able to earn that much of income which is not sufficient to acquire food equivalent to 2100 calories per person per day in urban areas and 2400 calories per person per day in rural areas. As per UNDP, one US dollar (1993 PPP US $) per person per day is treated as poverty line.

PQLIPQLI is known as Physical Quality of Life Index which is used to assess the level of social development. This index was developed by Jim Grant for The Overseas Development Council PQLI is calculated by using indices of (i) Adult literacy rate, (ii) IMR, (iii) Life

Expectancy.

Price Mechanism

Price mechanism signifies the working of those market forces which establishes equilibrium in the economy. Laissez faire policy is the basis for theworking of price mechanism.

Price Ring

It is an unofficial syndicate by which the prices are controlled with the prior understanding among the traders. These dealers under a price ring decide not to over-bid one another at the public auction to keep the prices low. This price ring may discourage outsiders from coming to the auctions.

Private SectorPrivate Sector is that part of the economy which is not owned by the government and is under the hands of private enterprise. In other words, private sector is not under direct government control. Private sector includes the personal as well as the corporate sector.

PrivatisationPrivatisation is the antithesis of nationalisation. When the government owned public industries are denationalised and the disinvestment process is initiated, it is called privatisation.

Public DebtPublic debt represents borrowing by the state and public authorities. All loans taken by the public authorities constitute public debt.

Public GoodsPublic goods are those goods which belong to the entire community. None of the individual of the society can be made deprived of using these public goods. National defence, Police, Street lighting etc. are examples of public goods.

Public SectorPublic sector signifies those undertakings which are owned, managed and run by public authorities. Public sector includes direct government enterprise, the nationalized industries and public corporations. In this sector of the economy the government acts itself as an entrepreneur.

Peril PointIt indicates that point beyond which tariff reductions would threaten the existence of domestic industry.

Quick AssetThose assets are quick assets which are liquid or nearly liquid in nature and easily be turned into cash.

Quoted CompanyThat company is called quoted company whose share prices are quoted on a stock exchange.

ReflationIt signifies general increase in the level of business activity in the economy. Reflation generally involves greater government expenditure and the easing of credit to encourage increased production.

Regressive TaxIt is a tax in which rate of taxation falls with an increase in income. In regressive taxation incidence falls more on people having lower incomes than that of those having higher incomes.

Repressed InflationIt is a state in which aggregate demand is greater than the total supply of goods and services in an economy, but prices are prevented from rising to eliminate excess demand. The holding down of price is sometimes done by government as a means of suppressing inflation.

Reserve Asset RatioIt is the ratio of a bank’s reserve assets to its eligible liabilities.

Revolving CreditIt is a bank credit that is renewed automatically until notice of cancellation is received. Revolving credits may be sanctioned for an unlimited amount in total but with a limit onthe amount that may be drawn at any one time or within a specified period, e.g., one month.

Seasonal UnemploymentIt is that unemployment which is caused by seasonal variation in demand for labour by various industries, such as agriculture, construction and tourism. Seasonal unemployment

normally declines in spring as more outdoor work can be undertaken.

SecuritySecurity refers to a share, bond or government stock that can be bought and sold, usually on the stock exchange or on a secondary market, and carries a right to some form of income, either in the form of a fixed rate of interest or dividends.

Shadow PriceIt is an imputed value for a good based on the opportunity costs of the resources used to produce it such values are of particular significance in resolving problems of resource allocating with respect to the effect on welfare.

Share CapitalIt is the amount of money raised by a company by issuing shares. The authorized share capital is the amount that a company is allowed to issue as laid down in its Articles of Association. The issued share capital is the amount actually issued i.e., the number of issued shares multiplied by their par value. Fully paid share capital is the amount raised by payment of the full par value of the issued shares.

Single Tax SystemIt is a system in which all tax revenues are raised from one form of taxation.

SocialismThe political doctrine that the means of production (machines, materials and output) should be owned by society and specifically either by the state, as in the case of nationalized industries or by the workers directly, as in the case of producer co-operatives.

Social SecurityProvision by the state out of taxation of welfare assistance to those in need as a result of illness, unemployment, or old age compare national insurance refers to social security.

Soft CurrencyA currency with limited convertibility into gold and other currencies, either because it is depreciating due to balance of payments difficulties or because controls have been placed on it to prevent the exchange rate falling.

Special Drawing Rights (SDRs)

It is a reserve asset (known as ‘Paper Gold’) created within the framework of the International Monetary Fund in an attempt to increase international liquidity, and now forming a part of countries official reserves along with gold, reserve positions in the IMF and convertible foreign currencies.

Special Tax (Unit Tax)It is a tax imposed per unit of a commodity rather than on the value of the commodity compare ad-valorem.

Stabilization PolicyIt is Government economic policy announced at reducing the cyclical and other fluctuations that take place in a market economy.

StagflationIt is a state of the economy in which economic activity is slowing down, but wages and prices continue to rise. The term is a blend of the words stagnation and inflation.

Surplus ValueIt is the difference between the amount paid to a factor and the revenue earned by selling the output it produced.

TariffIt is a tax or a duty on imports, which can be levied either on physical units, e.g., per tonne (specific), or on value (ad-valorem). Tariffs may be imposed for a variety of reasons including; to raise government revenue, to protect domestic industry from subsidized or low-wage imports, to boost domestic employment, or to ease a deficit on the balance of payments.

Trade GapIt signifies the size of the deficit (or surplus) in the balance of trade i.e., the difference in value between visible imports and exports.

Trade UnionIt is an organisation of employees who join together to further their interests. Trade Unions negotiate on behalf of their members in collective bargaining with employers, and in the event of a dispute may put pressure on employers by withdrawing labour (i.e.

strike) or by some less drastic form of action (i.e. go-slow, working to rule).

Transfer PaymentIt is a payment made by public authority other than one made in exchange for goods or services produced. Transfer payments are not the part of National Income. Examples includes unemployment benefit and child benefits.

Vital StatisticsVital statistics refers to those data which are associated with vital events of masses like birth, death, marriage divorce etc.

VAT (Value Added Tax)VAT seeks to tax the value added at every stage of manufacturing and sale, with a provision of refunding the amount of VAT already paid at the earlier stages to avoid double taxation. In other words, the tax already paid can be claimed at the next stage of value addition.

Wealth TaxWealth tax is that tax which is imposed on the value of total assets but the wealth upto a certain limit is exempted from such tax.Welfare State

It refers to a nation that provides to all at least the minimum standards in respect of education, health, housing, pensions and other social benefits.

Wholesale Price IndexWholesale Price Index is that index which is calculated on the basis of wholesale prices. It is calculated in a similar way to the Retail Price Index.