Economic Terms-Part 1
- Poverty defined with respect to an absolute material standard of living.
- Someone is absolutely poor if their income does not allow them to consume enough to purchase a minimum bundle of consumer goods and services (including shelter, food and clothing).
- An alternative approach is to measure relative poverty.
AADHAAR PAYMENT BRIDGE SYSTEM
- Implemented by National Payments Corporation of India (NPCI)
- Used by the government departments and agencies for electronic transfer of benefits and subsidiaries under Direct Benefit Transfer (DBT) scheme
- Uses Aadhaar numbers issued by UIDAI & IIN (Institution Identification Number) issued by NPCI.
- IIN is a unique 6 digit number issued by NPCI to every APB System participating bank and is used to uniquely identify a bank to which the APB transaction has to be routed in the Aadhaar Payment Bridge (APB) System.
AD VALOREM TAX
- An ad valoremtax is a tax based on the assessed value of an item, such as real estate or personal property.
- The most common ad valoremtaxes are property taxes levied on real estate.
- However, ad valoremtaxes may also extend to a number of tax applications, such as import duty taxes on goods from abroad.
- Ad valorem taxes are generally levied on both real property (land, buildings and other structures) and major personal property, such as a car or boat.
- Agricultural Census, which is conducted every five years in India.
- It is the largest countrywide statistical operation undertaken by Ministry of Agriculture, for collection of data on structure of operational holdings by different size classes and social groups.
- Primary (fresh data) and secondary (already published) data on structure of Indian agriculture are collected under this operation with the help of State Governments.
- The first Agricultural Census in the country was conducted with reference year 1970-71.
- Agricultural Census is carried out as a Central Sector Scheme under which 100% financial assistance is provided to States/Union Territoriess.
- Agricultural Census operation is carried out in three phases.
- They are alternative cryptocurrencies that were launched after Bitcoin’s success.
- They generally project themselves as better replacements for Bitcoin.
- Bitcoin’s emergence as the first peer-to-peer digital currency was paving the way for many to follow.
- Most altcoins are trying to target any perceived drawbacks that Bitcoin has and come up with competitive advantages in newer versions.
- Angel funds refers to a money pool created by high-net-worth individuals or companies (generally called as angel investors), for investing in business startups.
- They are a sub-category of venture capital funds with strict focus on startups, while venture capital funds generally invest at a later stage of development of the investee company.
- In India the term Angel Funds is defined in SEBI (Alternative Investment Funds) (Amendment) Regulations, 2013.
- Angel fund is defined as a sub-category of Venture Capital Fund under Category I- Alternative Investment Fund (AIF) that raises funds from angel investors and invests in accordance with the rules specified in Chapter III –A of SEBI (Alternative Investment Funds) (Amendment) Regulations, 2013.
- Angel funds can raise funds only by way of issue of units to angel investors and should have a corpus of at least ten crore rupees.
- Angel tax was introduced in the 2012 budget by the then finance minister to arrest laundering of funds.
- Misuse of the incentives given to the start-ups was the main factor that tempted the government to impose tax on fresh investments over fair price of shares.
- Technically, angel tax is an income tax payable on capital raised by unlisted companies from investors (mostly angel investors) via issue of shares if the sold share price is excess of the fair market value of the shares.
- It is popularised as angel tax by the business community because such investment is usually a main fund mobilisation channel for start-ups that are mostly unlisted entities.
ANNUAL FINANCIAL STATEMENT
- Annual Financial Statement is a document presented to the Parliament every year under Article 112 of the Constitution of India, showing estimated receipts and expenditures of the Government of India for the coming year in relation to revised estimates for the previous year as also the actual amounts for the year prior to it.
- The receipts and disbursements are shown under three parts in which Government Accounts are to be kept viz.,(i) Consolidated Fund, (ii) Contingency Fund and (iii) Public Account.
- Under the Constitution, Annual Financial Statement has to distinguish expenditure on revenue account from other expenditure. Government Budget, therefore, comprises of Revenue Budget and Capital Budget.
- The estimates of receipts and disbursements in the Annual Financial Statement are shown according to the accounting classification prescribed by Comptroller and Auditor General of India under Article 150 of the Constitution, which enables Parliament and the public to make a meaningful analysis of allocation of resources and purposes of Government expenditure.
‘ASSET TURNOVER RATIO’
- Asset turnover ratio is the ratio between the value of a company’s sales or revenues and the value of its assets. It is an indicator of the efficiency with which a company is deploying its assets to produce the revenue.
- Thus, asset turnover ratio can be a determinant of a company’s performance. The higher the ratio, the better is the company’s performance. Asset turnover ratio can be different from company to company. Usually, it is calculated on an annual basis for a specific financial year.
- Generally, a low asset turnover ratio suggests problems with surplus production capacity, poor inventory management and bad tax collection methods. Low-margin industries always tend to have a higher asset turnover ratio.
- Bailout is a general term for extending financial support to a company or a country facing a potential bankruptcy threat. It can take the form of loans, cash, bonds, or stock purchases. A bailout may or may not require reimbursement and is often accompanied by greater government oversee and regulations.
- The reason for bailout is to support an industry that may be affecting millions of people internationally and could be on the verge of bankruptcy due to prolonged financial crises.
- Bailout policies come in various forms, the most common being direct loans or guarantees of third-party (private) loans to the rescued entity. These direct loans are often on terms favouring the entity being rescued. Sometimes even direct subsidies are provided to the parties concerned. Stock purchases are also not uncommon.
- Bailouts have several advantages. First, they ensure continued survival of the entity being rescued under difficult economic circumstances. Secondly, a complete collapse of the financial system can be avoided, when industries too big to fail start to crumble. The government in these cases steps in to avoid the insolvency of institutions that are needed for the smooth functioning of the overall markets.
- Bailouts also have their disadvantages. Anticipated bailouts encourage a moral hazard by allowing not only promoters but also other stakeholders (customers, lenders, suppliers) to take higher-than-recommended risks in financial transactions. This happens because they start counting on a bailout when things go wrong.
BALANCE OF TRADE
- The difference between a country’s imports and its exports. Balance of trade is the largest component of a country’s balance of payments.
- Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad.
- Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy.
- A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.
Also referred to as “trade balance” or “international trade balance.”
- Bank rate is the rate charged by the central bank for lending funds to commercial banks.
- Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks.
- In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa.
- The Reserve Bank of India determines the bank rate. The rate is changed from time to time but it does not mean that there is already a set schedule for it.
- The rate at which the repo rates are changed depends entirely on the prevailing economy.
BANKING OMBUDSMAN SCHEME
- The Banking Ombudsman Scheme was implemented by the RBI to redress the complaints of customers on certain types of banking services provided by banks and to facilitate the settlement of those complaints.
- The scheme was introduced under the Banking Regulation Act of 1949 by RBI with effect from 1995. Later it was legally refined and modified through the introduction of regulations under Banking Ombudsman Scheme 2006. The latest revision was made in 2017.
- The Banking Ombudsman actually is a senior official appointed by the RBI to redress customer complaints against pitfalls in the stipulated banking services covered by the Banking Ombudsman Scheme 2006 (modifications were made in 2017).
- All Scheduled Commercial Banks, Regional Rural Banks (RRBs) and Scheduled Primary Co-operative Banks (UCBs) are covered under the Scheme.
BANKS BOARD BUREAU (BBB)
- Banks Board Bureau (BBB) is an autonomous advisory body created by the government to enhance the governance of the Public Sector Banks and state-owned financial institutions.
- The most popular function of the BBB is to recommend the whole-time directors as well as non-executive chairpersons of public sector banks (PSBs) and state-owned financial institutions.
- The BBB was created after the recommendations of the Committee to Review Governance of Boards of Banks in India (Chairman -PJ Nayak Committee – 2014).
- Main objective of the creation of BBB was to empower the boards of the Public Sector Banks.
- It was created in February 2016 and started functioning from April 2016.
- It is an autonomous recommendatory body.
- A search Committee including the RBI Governor recommends the names for the appointment of BBB members.
- The six member BBB panel has three government officials and three experts, of which two are from banking sector.
Following are the main functions of the BBB.
- Responsible for the selection and appointment of Board of Directors in PSBs and FIs (Whole-time Directors and Non-Executive Chairman);
- Advise the Government on matters relating to appointments, confirmation or extension of tenure and termination of services of the Board of Directors of the above-mentioned levels.
- To advise the Government on the desired structure at the Board level, and, for senior management personnel, for each PSB and Financial Institution (FI).
- To help banks to develop a robust leadership succession plan for critical positions that would arise in future through appropriate HR processes including performance management systems.
- To build a data bank containing data relating to the performance of PSBs/FIs and its officers.
- To advise the Government on the formulation and enforcement of a code of conduct and ethics for managerial personal in PSBs/Financial Institutions.
- To advise the Government on evolving suitable training and development programmes for management personnel in PSBs/FIs; and
- To help banks in terms of developing business strategies and capital raising plan etc.
- Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers.
- Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done by adding base rate and a suitable spread depending on the credit risk premium.
BASE EROSION AND PROFIT SHIFTING (BEPS)
- It refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately.
- BEPS practices cost countries USD 100-240 billion in lost revenue annually.
- Working together within OECD/G20 Inclusive Framework on BEPS, over 135 countries and jurisdictions are collaborating on the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.
BASEL COMMITTEE ON BANKING SUPERVISION
- The BASEL Committee is a committee of bank supervisors consisting of members from each of the G10 countries.
- The Committee is a forum for discussion on the handling of specific supervisory problems.
- It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks’ foreign establishments with the aim of ensuring effective supervision of banks’ activities worldwide.
BASEL CAPITAL ACCORD
- The BASEL Capital Accord is an Agreement concluded among country representatives in 1988 to develop standardised risk-based capital requirements for banks across countries.
- The Accord was replaced with a new capital adequacy framework (BASEL II), published in June 2004.
- BASEL II is based on three mutually reinforcing pillars hat allow banks and supervisors to evaluate properly the various risks that banks face.
- These three pillars are:
- Minimum capital requirements, which seek to refine the present measurement framework
- supervisory review of an institution’s capital adequacy and internal assessment process;
- market discipline through effective disclosure to encourage safe and sound banking practices
- Refers to the incremental income that people who are physically attractive earn when compared to others who are considered less attractive.
- The beauty premium has been attributed by researchers to a variety of reasons, including psychological biases that affect employer choices while hiring workers.
- Workers and managers who are physically attractive may be considered more honest and competent at work than others.
- Some researchers, however, have denied the existence of the beauty premium in the labour market.
- They argue that wage differences can be explained by factors other than physical beauty.
BENCHMARK INTEREST RATES
- SONIA is short for Sterling Overnight Interbank Average Rate (weighted average overnight rate paid by banks for unsecured transactions in the British sterling market)
- LIBOR (London Interbank Offered Rate)
- SOFR (US), ESTR (European Union) and TONAR (Japan)
- MIFOR (Mumbai Interbank Forward Offer Rate)
- MODI – Mumbai Overnight Derivatives and Interest rate ( Future Indian benchmark)
- Note: Indian businesses borrow dollars in the form of external commercial borrowings (ECBs). The interest costs on these borrowings are usually linked to LIBOR. In fact, RBI’s regulations on ECBs also use LIBOR to calculate the cost of loans.
BHARAT BOND ETF
- Debt exchange-traded fund (ETF) that will hold bonds issued by PSEs owned by the Government of India.
- Bharat Bond ETF is the first corporate bond ETF in the country going to be traded in the stock exchanges.
- It is a brand-new investment product for the investors as well.
- The Bharat Bond ETF invests in AAA rated bonds of PSEs such as REC, PFC, NHAI, etc.
- The minimum amount is Rs 1,000 per bond and there is no maximum limit. But for retail investors, there is an upper limit of Rs 2 Lakhs.
- The Bharat Bond ETF offers a unique combination of assured return (if held to maturity), beneficial tax treatment (if held for more than three years) and liquidity (if one needs to exit before maturity – as the ETFs will be listed on the exchanges).
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