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OCTOBER 25, 2012

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The Bank Rate is the rate at which the bills of exchange are rediscounted by the Reserve Bank of India. Put simply, it implies the rate of interest charged by the Reserve Bank from Commercial Banks on short-term lending. Also known as the Discount Rate. 



The apex authority for redressal of customers’ grievances with regard to the services provided by commercial banks.




Base Rate is the minimum, floor rate fixed by a bank for lending to its customers. A bank cannot lend to any customer at a rate less than the base rate. The actual lending rate in a particular case depends on several variables including the increment to be added to the base rate, depending on risk factors.


This is the exact opposite of the Prime Lending Rate, the highest interest rate chargeable on loans given by a bank.  This policy of having a ceiling rate has been abolished by the RBI and has been replaced with a Base Rate regime.



BOLT - 1

The Build-Operate-Lease-Transfer system under the Public-Private Partnership (PPP) model is a policy applicable in case of infrastructure projects like airports, expressways, toll plazas and roads. Under this system, the government awards a contract to a private party to build, operate and lease the project for  afized duration post which, the management and ownership of the project is transferred to the government. During the lease period, the private party can levy an agreed upon user fee to recover its cost and generate profits.


BOLT - 2

The BSE Online Trading System is a computer terminal-based system which allows its members to buy and sell shares in real-time using the screen-based trading system. It is far cry from the days when the Bombay Stock Exchange used to have an open outcry system wherein there used to be open bidding among sellers and buyers in the trading ring.




Book building refers to the process of bidding for an Initial Public Offer by quoting a price somewhere between the lowest price and the highest price band fixed by the issuer. Under this, the offer price for public issue in the primary market is decided on the basis of the quotes given by prospective buyers. As such it is also called price discovery mechanism. The shares are issued to the applicants as per the price decided by the merchant banker to the issue.


In the fixed price method,  there is always a fear of over-subscription or under-subscription. However, in a book-built IPO, potential investors enjoy the flexibility to bid for the shares at prices they want   to pay. The final price is decided after an analysis of the demand generated.  


Is the science of maintaining the accounts books of a company, organization or trust as per the prevailing laws.



In response to a series of events resulting in major losses to its counter parties, Central Bankers from G-8 countries have formed a committee under the aegis of the Bank for International Settlements in Basel, Switzerland. They have formulated the norms to be adopted by nations in International Banking. The core idea is that the Banks, especially those engaged in cross-border Banking, must have a minimum prescribed capital to address the Credit Risks it faces. These norms were called "Basel-I norms" which were later modified in 1996.



The ability of a bank to absorb sudden, unpredictable losses depends on its capital base. The goals of Basel II, which are central to sustained economic development in the long run, are:


1. Promotion of safe and sound practices in the financial system


2. Designing capital adequacy approaches that are sensitive, as per risk in a bank's financial activities on a continuous basis, and


3. The designing of a more comprehensive approach to address risks.




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