BANKING TERMS Amalgamation It 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. Appreciation Appreciation 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. Arbitrage When a person performs functions of middle man and uys and sells goods at a particular time to cash the price differences of two markets, this action is termed as ar itrage. !urchases 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. Arbitration Where there is an industrial dispute, the Ar itration comes to the force. The "udgement is given y the Ar itrator. #oth the parties have to accept and honour the Ar itration. Ar itration is the settlement of la our disputes that takes place etween employer and the employees. Balance of Payment #alance of payment of a country is a systematic record of all economic transactions completed etween its residents and the residents of remaining world during a year. In other words, the alance of payment shows the relationship etween the one countrys total payment to all other countries and its total receipts from them. #alance of payment is a comprehensive term which includes oth visi le and invisi le items. #alance of payment not only include visi le e$port and imports ut also invisi le trade like shipping, anking, insurance, tourism, royalty, payments of interest on foreign de ts. Balance of Trade #alance of trade refers to the total value of a countrys e$port commodities and total value of imports commodities. Thus alance of trade includes only visi le trade i.e., movement of goods %e$ports and imports of goods&. #alance of trade is a part of #alance of payment statement. Balance Sheet #alance sheet is a statement showing the assets and lia ilities of a usiness at a certain date. #alance sheet helps in estimating the real financial situation of a firm. Bank #ank is a financial institution. It accepts funds on current and deposit accounts. It also lends money. The ank pays the che'ues drawn y customers against current and deposits accounts. The ank is a trader that deals in money and credit. Bank Rate #ank (ate is the rate of discount at which the central ank of the country discounts first class ills. It is the rate of interest at which the central ank lends money to the lower anking institutions. #ank rate is a direct 'uantitative method of credit control in the economy. Black Money It is unaccounted money which is concealed from ta$ authorities. All illegal economic activities are dealt with this lack )oney. *awala market has deep roots with this lack money. #lack money creates parallel economy. It puts an adverse pressure on e'uita le distri ution of wealth and income in the economy. Bl e !hip It is concerned with such e'uity shares whose purchase is e$tremely safe. It is a safe investment. It does not involve any risk. Bl e !ollar "ob# These +o s are concerned with factory. !ersons who are unskilled and depend upon manual "o s that re'uire physical strain on human muscle are said to e engaged in #lue ,ollar +o s. In the age of machinery, such +o s are on the decline these days. Brain$%rain It means the drift of intellectuals of a country to another country. -cientists, doctors and technology e$perts generally go to other prominent countries of the world to etter their lot and earn huge sums of money. This #rain.Drain deprives a country of its genius and capa ilities.

B dget It is a document containing a preliminary approved plan of pu lic revenue and pu lic e$penditure. It is a statement of the estimated receipt and e$penses during a fi$ed period, it is a comparative ta le giving the accounts of the receipts to e reali/ed and of the e$penses to e incurred. B ll #ull is that type of speculator who gains with the rise in prices of shares and stocks. *e uys share or commodities in anticipation of rising prices and sells them later at a profit. B ll Market It is a market where the speculators uy shares or commodities in anticipation of rising prices. This market ena les the speculators to resale such shares and make a profit. B oyancy When the government fails to check inflation, it raises income ta$ and the corporate ta$. -uch a ta$ is called #uoyancy. It concerns with the revenue from ta$ation in the period of inflation. B #ine## !ycle #usiness cycle %also known as trade cycle& are species of fluctuations in the economic activity of organised communities. It is composed of period of good trade characterised y rising prices and low unemployment, alternating with period of ad trade characterised y falling prices and high unemployment. 0very trade cycle have five different su phases1depression, recovery, full employment, prosperity % oom& and recession. !apital Market ,apital market is the market which gives medium term and long term loans. It is different from money market which deals only in short term loans. !apitali#m ,apitalism is an economic system in which all means of production are owned y private individuals -elfprofit motive is the guiding feature for all the economic activates under capitalism. 2nder pure capitalism system economic conditions are regulated solely y free market forces. This system is ased on 3aisse/.faire system i.e., no state intervention. -overeignty of consumer prevails in this system. ,onsumer ehaves like a king under capitalism. !a#h Re#er&e Ratio '!RR( The commercial anks are re'uired to keep a certain amount of cash reserves at the central ank. This percentage amount is called ,((. It influences the commercial anks volume of credit ecause variation in ,(( affects the li'uidity position of the anks and hence their a ility to lend. !en# # ,ensus gives us estimates of population. ,ensus is of great economic importance for the country. It tells us the rate at which thetotal population is increasing among different age groups. In India census is done after every 45 years. The latest census in India has een done in 6554. !entral Bank ,entral #ank may e defined as the ape$ arking and monetary institution whose main function is to control, regulate and sta ili/e the anking and the monetary system of the country in the national interest. !he) e ,he'ue is an order in writing issued y the drawer to a ank. If the customer has sufficient amount in his account, the che'ue is paid y the ank. ,he'ues are used in place of cash money. !learing Bank ,learing ank is one which settles the de its and credits of the commercial anks. 0ven of the cash alances are lesser, clearing ank facilitates anking operation of the commercial ank. !lo#ed Economy ,losed economy refers to the economy having no foreign trade %i.e., e$port and import&. -uch economies depend e$clusively on their own internal domestic resources and have no dependence on outside world. !oll #ion !roducers of an industry reduce competition among themselves to raise their profits. They fi$ the price themselves with a clear understanding in this regard. This understanding among different firms is called collusion. !omm ni#m ,ommunism is a political and economic system in which the state makes the ma"or economic decision -tate owns the ulk of capital assets. (esponsi ility for production and distri ution lies with the state in this system.

! #tom % ty ,ustom duty is a duty that is imposed on the products received from e$porting nations of the world. It is also called protective duty as it protects the home industries. !yclical *nemployment It is that phase of unemployment which appears due to the occurrence of the downward phase of the trade cycle. -uch an employment is reduced or eliminated when the usiness cycle turns up again. %eflation Deflation is the reverse case of inflation. Deflation is that state of falling prices which occurs at that time when the output of goods and services increases more rapidly than the volume of money in the economy. In the deflation the general price level falls and the value of money rises. %e&al ation The loss of value of currency of a country relative to other foreign currency is known as devaluation. Devaluation is a process in which the government deli erately cheapens the e$change value of its own currency in terms of other currency y giving it a lower e$change value. Devaluation is used for improving, the alance of payment situation in the country. %irect Ta+ A ta$ is said to e a direct ta$ when it is not intended to e shifted to any ody else. The person who pays it in the first instance is also e$cepted to ear it. Thus the impact and incidence of direct ta$ fall on the same person shifting of direct ta$ is not possi le Income Ta$ is a e$ample of direct ta$. %i#inflation It refers to a process of ringing down prices moderately from their high level without any adverse impact on production and employment. Thus, disinflation is an anti.inflationary measure. E+ci#e % ty It is a ta$ which is imposed on certain indigenous production %e.g., petroleum products, cigarettes etc.& of the country. 0$cise duty may e imposed either to raise revenue or to check the consumption of the commodities on which they are imposed. 0$cise duty is progressive in nature. ,ederal Economy It 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 etween the federal %or central& government and the state governments. In a federal economy oth the centre and the states are independent in the e$ercise of this authority. ,i#cal Policy 7iscal policy is that part of government economic policy which deals with ta$ation, e$penditure, orrowing, and the management of pu lic de t in the economy. 7iscal policy primarily concerns itself with the flow of funds in the economy. 7iscal policy primarily concerns itself with the flow of funds in the economy. It e$erts a very powerful influence on the working of economy as a whole. G%I 8DI %8ender (elated Development Inde$& is a composite inde$ measuring average achievement in the three asic dimensions captured in the human development inde$1a long and healthy life, knowledge and a decent standard of living1ad"usted to account for ine'ualities etween men and women. Giffin Good# 8iffin goods have the positive relationship etween price and 'uantity demanded and as a result demand curve of 8iffin goods slopes upward from left to right. This phenomenon was first o served y -ir (o ert 8iffin in relation to the demand for read y poor la ours. Gro## %ome#tic Prod ct 'G%P( It is the money value of all final goods and services produced within the geographical oundaries of the country during a given period of time %usually a year&. 8D! can e calculated oth at current prices and at constant prices. If we add net factor income from a road to the 8D!, we get 8ross 9ational !roduct %89!&. Gro## National Prod ct 'GNP( It refers to the money value of total output or production of final goods and services produced y the nationals of a country during a given period of time, generally a year. -%I *DI %*uman Development Inde$& is a composite inde$ measuring average achievement in three asic dimensions of human life1a long and healthy life, knowledge and a decent standard of living. Import % ty

Import duty is a ta$ on imports imposed on an ad.valorem asis i.e., fi$ed in the form of a percentage on the value of the commodity imported. Indirect Ta+ Indirect ta$ is that ta$ which is levied on goods or services produced or purchased. Indirect ta$es are those which are demanded from one person in the e$pectation and intention that he shall indemnify himself at the e$pense to another. Inflation A situation of a steady and sustained rise in general prices is usually known as inflation. Inflation is a state in which the value of money is falling i.e., prices are rising. .ai##e/ ,aire It is a 7rench word meaning non.interference. This doctrine was popularised y classical economists who gave the view that government should interfere as little as possi le in the economic activities of the individuals. .ife E+pectancy at Birth The num er of years a new orn infant would live if prevailing pattern of age specific mortality rates at the time of irth were to stay the same throughout the childs life. .i) idation It refers to the termination %or winding up& of a registered company. 3i'uidation takes place ecause of companys insolvency. In li'uidation, assets are turned into cash for settling outstanding de ts and for apportioning the alance, if any, amongst the owners. .i) idity Assets which can easily e converted into cash money are said to have li'uidity. 3and does not possess li'uidity at it takes longer time to get converted into cash. .i) idity Ratio The commercial anks under anking regulations have to maintain a certain specified proportion of their total deposits of various categories in li'uid assets. This maintaina le proportion is called li'uidity ratio. Merit Good# )erit goods refer those goods that are very essential to the society as a whole and hence the government ensures their availa ility to all consumers, regardless of their a ility to pay to reasona le price. Mi+ed Economy It refers to that economic system in which oth private and pu lic sector co.e$ists. Indian economy is an e$ample of a mi$ed economy. Monetary Policy )onetary policy comprises all measures applied y the monetary authorities with a view to produce a deli erate impact on the nature and volume of money so as to achieve the o "ectives of general economic policy. It aims at regulating the flow of currency, credit and other money su stitutes 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. Monopoly )onopoly refers to that market structure where there is only one seller in the market who controls the entire market supply and no su stitute of the product is availa le in the market. M ltinational !ompany It is a large scale company which has its production ase in several countries and the ulk of the production is produced in outside nations. This company produces more overseas than they do in its parent country. Increased trade and economies of scale have encouraged such type of companies in the recent years. National Income In the simplest way it can e 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 a road. 9et national product at factor cost is called national income. 0ligopoly :ligopoly 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 e having product differentiation in a given line of production. Perfect !ompetition !erfect competition is the market in which there are many firms selling identical products with no firm large enough relative to the entire market to e a le to influence market price.

Po&erty .ine !overty line is a virtual line demarcating persons living elow and a ove it. In India all those persons are treated living elow poverty line who are not a le to earn that much of income which is not sufficient to ac'uire food e'uivalent to 6455 calories per person per day in ur an areas and 6;55 calories per person per day in rural areas. As per 29D!, one 2- dollar %4<<= !!! 2- >& per person per day is treated as poverty line. Pri&ate Sector !rivate -ector is that part of the economy which is not owned y the government and is under the hands of private enterprise. Inother words, private sector is not under direct government control. !rivate sector includes the personal as well as the corporate sector. Pri&ati#ation !rivatisation is the antithesis of nationalisation. When the government owned pu lic industries are denationalised and the disinvestment process is initiated, it is called privatisation. P blic Sector !u lic sector signifies those undertakings which are owned, managed and run y pu lic authorities. !u lic sector includes direct government enterprise, the nationali/ed industries and pu lic corporations. In this sector of the economy the government acts itself as an entrepreneur. Sea#onal *nemployment It is that unemployment which is caused y seasonal variation in demand for la our y various industries, such as agriculture, construction and tourism. -easonal unemployment normally declines in spring as more outdoor work can e undertaken. Sec rity -ecurity refers to a share, ond or government stock that can e ought and sold, usually on the stock e$change or on a secondary market, and carries a right to some form of income, either in the form of a fi$ed rate of interest or dividends. Shado1 Price It is an imputed value for a good ased on the opportunity costs of the resources used to produce it such values are of particular significance in resolving pro lems of resource allocating with respect to the effect on welfare. Special %ra1ing Right# 'S%R#( It is a reserve asset %known as !aper 8old& created within the framework of the International )onetary 7und in an attempt to increase international li'uidity, and now forming a part of countries official reserves along with gold, reserve positions in the I)7 and converti le foreign currencies. Tariff It is a ta$ or a duty on imports, which can e levied either on physical units, e.g., per tonne %specific&, or on value %ad. valorem&. Tariffs may e imposed for a variety of reasons including? to raise government revenue, to protect domestic industry from su sidi/ed or low.wage imports, to oost domestic employment, or to ease a deficit on the alance of payments. 2ital Stati#tic# @ital statistics refers to those data which are associated with vital events of masses like irth, death, marriage divorce etc. 2AT '2al e Added Ta+( @AT seeks to ta$ the value added at every stage of manufacturing and sale, with a provision of refunding the amount of @AT already paid at the earlier stages to avoid dou le ta$ation. In other words, the ta$ already paid can e claimed at the ne$t stage of value addition. 3ealth Ta+ Wealth ta$ is that ta$ which is imposed on the value of total assets ut the wealth upto a certain limit is e$empted from such ta$. 3hole#ale Price Inde+ Wholesale !rice Inde$ is that inde$ which is calculated on the asis of wholesale prices. It is calculated in a similar way to the (etail !rice Inde$.

!ommon Glo##ary Related to B dget

*nion B dget

2nder Article 446 of the constitution, a statement of estimated receipts and e$penditure, called the Annual 7inancial -tatement, has to e placed efore !arliament for each financial year. This -tatement is the main udget document. It is an estimate of the 8overnments revenue and e$penditure at the end of a fiscal year, which runs from April 4 to )arch =4. A 2nion #udget is the most comprehensive report of the 8overnments finances, in which revenues from all sources and outlays to all activities are consolidated. The udget also contains estimates of the 8overnments accounts for the ne$t fiscal, called udgeted estimates. !apital B dget The capital udget consists of capital receipts and payments. ,apital receipts are 8overnment loans raised from the pu lic, 8overnment orrowings from the (eserve #ank and treasury ills, divestment of e'uity holding in pu lic sector enterprises, loans received from foreign 8overnments and odies, securities against small savings, -tate provident funds, and special deposits. ,apital payments refer to capital e$penditures on construction of capital pro"ects and ac'uisition of assets like land, uildings machinery and e'uipment. It also includes investments in shares, and loans and advances granted y the ,entral 8overnment to -tate 8overnments, 8overnment companies, corporations and other parties. Re&en e B dget The revenue udget consists of revenue receipts of the 8overnment and its e$penditure. (evenue receipts are divided into ta$ and non.ta$ revenue. Ta$ revenues constitute ta$es like income ta$, corporate ta$, e$cise, customs, service and other duties that the 8overnment levies. The non.ta$ revenue sources include interest on loans, dividend on investments etc. (evenue e$penditure is the e$penditure incurred on the day.to.day running of the 8overnment and its various departments, and for services that it provides. It also includes interest on its orrowings, su sidies and grants given to -tate 8overnments and other parties. This e$penditure does not result in the creation of assets. In case the difference etween revenue receipts and revenue e$penditure is negative, there is a revenue deficit. It shows the shortfall of the 8overnments current receipts over current e$penditure. If the capital e$penditure and capital receipts are taken into account too, there will e a gap etween the receipts and e$penditure in a year. This gap constitutes the overall udgetary deficit, and it is covered y issuing <4.day Treasury #ills, mostly held y the (eserve #ank. (evenue surplus is the e$cess of revenue receipts over revenue e$penditure. ,i#cal %eficit This is the gap etween the 8overnments total spending and the sum of its revenue receipts and non.de t capital receipts. It represents the total amount of orrowed funds re'uired y the 8overnment to completely meet its e$penditure. The gap is ridged through additional orrowing from the (eserve #ank of India, issuing 8overnment securities etc. 7iscal deficit is one of the ma"or contri utors to inflation. ,inance Bill The 8overnment proposals for the levy of new ta$es, alterations in the present ta$ structure, or continuance of the current ta$ structure are placed efore the !arliament in this ill. The ill contains amendments proposed to direct and indirect ta$es. %irect and Indirect Ta+e# Direct ta$es are levied on the incomes of individuals and corporates. 7or e$ample, income ta$, corporate ta$ etc. Indirect ta$es are paid y consumers when they uy goods and services. These include e$cise duty, customs duty etc. !ontingency f nd 4 This is a fund used for meeting emergencies where the 8overnment cannot wait for an authorisation of the !arliament. The 8overnment su se'uently o tains !arliamentary approval for the e$penditure. The amount spent from the contingency fund is returned to the fund later. Monetary policy 4 This comprises actions taken y the central ank to regulate the level of money or li'uidity in the economy, or change the interest rates.