Security :A security is a negotiable
instrument representing financial
Bond (also known as Debenture): it is a
long-term debt instrument used by
governments and large companies to
obtain funds. It is defined as "any form of
borrowing that commits a firm to pay
interest and repay capital”.
Commonly Used Terms
Share (also known as stock and
equity):means a share of ownership in a
In finance, the money market is the global
financial market for short-term borrowing
and lending. It provides short-term
liquidity funding for the global financial
The Capital Market is the market for
securities, where companies and
governments can raise long term funds
(periods longer than a year). The capital
market includes the stock market and the
bond market. Financial regulators like
SEBI, oversee the capital markets in their
countries to ensure that investors are
protected against fraud.
Capital Market contd.
Primary market :The primary market is that part
of the capital markets that deals with the
issuance of new securities. For e.g. In the case
of a new stock issue, this sale is an initial public
Secondary market: Is the financial market
where previously issued securities and financial
instruments such as stock, bonds are bought
Understanding Indian economy
One of the roles of RBI.
Monetary policy is the process by which
the RBI controls (I) availability of money,
and (ii) cost of money or rate of interest,
in order to attain a set of objectives
oriented towards the growth and stability
of the economy
Types of Monetary policy
Expansionary policy: increases the total
supply of money in the economy, to
combat unemployment in a recession by
lowering interest rates.
Contractionary policy: involves raising
interest rates in order to combat inflation.
Important terms in monetary policy
CRR: (CASH RESERVE RATIO)
RBI or central banks require banks
to keep a small portion of their deposits as
“banks reserves”, which the banks cannot
Q.1:What will happen if RBI increases CRR?
Bank Rate/Repo rate
This is the rate at which RBI lends money
to other banks (or financial institutions).
These loans are usually very short-term
Reverse Repo Rate
The rate at which RBI borrows money
from the banks (or banks lend money to
the RBI) is termed the reverse repo rate.
The RBI uses this tool when it feels there
is too much money floating in the banking
What is the CRR
Reverse repo rate
Current Rates Figures (as of Jan 6, 2009)
CRR = 5.0%
Repo Rate = 5.5%
Reverse Repo Rate = 4.0%
Fiscal Policy is considered to be acts of a
government to influence the direction of nation’s
economy by using its financial and regulatory
Financial power: The two main important
instruments of fiscal policy are government
spending and taxation.
Regulatory powers :The ability of government to
influence its people to change their behaviour.
Government Revenue: Government generates
revenue by collecting taxes from its people and
By changing tax rates government can influence
demand. For e.g.– lowering of income tax rate
will increase the disposable income of people.
With more money in hand people will spend
those money on goods and service; hence,
creating a demand for the same.
Constructing schools, colleges, hospitals,
ports, airports, highways, factories etc.
In several welfare schemes such as
unemployment benefits, elderly pensions,
Quiz:What is infrastructure?
Infrastructure can be defined as the basic
physical and organizational structures
needed for the operation of a society or
the services and facilities necessary for an
economy to function. E.g. :roads, water
supply, sewers, power grids,
Business Planning For Development
FUNDS CAPITAL FUNDS
DEBT RETURN ON AND
SERVICE OF EQUITY
& MUNICIPAL SKILLS &
SERVICES THE REAL ESTATE SERVICES
PUBLIC SECTOR ______ ____________
PROPERTY TAXES Political / Physical / Economic OPERATOR
& USE FEES Opportunities & Constraints INCENTIVES
OCCUPANCY USE &
THE MARKET 26