The Efficient Market Hypothesis asserts that financial markets are "informationally efficient". Since prices already reflect all known information, no investor can have an edge, and "beating the market" consistently is impossible except through luck.

The Call/Notice/Term Money market is classified by tenor: "Call Money" is for 1 day, "Notice Money" is for 2-14 days, and "Term Money" is for 15 days up to 1 year.

Application Supported by Blocked Amount (ASBA) ensures that funds are debited from the investor's account only when shares are actually allotted, allowing them to earn interest on the blocked amount in the interim.

A Direct Quote expresses the price of one unit of foreign currency in terms of domestic currency (e.g., how many Rupees for 1 Dollar). India follows the Direct Quote system. An Indirect Quote would be INR 1 = USD 0.012.

Merchant Bankers are capital market intermediaries regulated by SEBI. Unlike commercial banks, they are not allowed to carry out core banking functions like accepting demand deposits from the general public.

Futures are standardized contracts traded on exchanges with a central counterparty (clearinghouse), virtually eliminating counterparty risk. Forwards are customized, Over-the-Counter (OTC) contracts between two parties, carrying higher counterparty risk.

Ideally, the Factor advances about 80-90% of the invoice value immediately to the client. The balance (minus charges) is paid when the customer (debtor) makes the full payment.

Mezzanine Financing is a late-stage financing round, typically used by companies that are already generating revenue and looking to scale up significantly before going public (IPO). It often combines debt and equity features.

A Financial Lease is a non-cancellable contractual commitment where the lessee uses the asset for most of its economic life, bearing all risks and rewards, effectively acting like the owner.

CIBIL (TransUnion CIBIL) is a Credit Information Company (CIC) that maintains credit records of individuals/companies, not a Credit Rating Agency (CRA) that rates debt instruments. CRAs evaluate the creditworthiness of issuers of debt securities.

Hybrid Funds invest in more than one asset class (usually Equity and Debt) to achieve a balance between growth (from equity) and income/stability (from debt).

Insurance contracts require "Utmost Good Faith," meaning both the insurer and the insured must disclose all material facts relevant to the risk. Hiding information can lead to the policy being voided.

In NPS, Asset Class E is Equity, Class C is Corporate Bonds, Class G is Government Securities, and Class A is Alternative Investment Funds.

Para Banking activities are financial services undertaken by banks that are ancillary to their core banking business, such as Mutual Fund distribution, Insurance (Bancassurance), and Portfolio Management Services.

REITs are investment vehicles that pool funds to invest in real estate. They function like mutual funds and are regulated by SEBI under the REIT Regulations, 2014.

Commercial Papers can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue.

SEBI guidelines allow the Green Shoe Option (price stabilization mechanism) to be exercised for up to 15% of the total issue size.

PPP theory asserts that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries. It is based on the "Law of One Price".

International factoring typically involves two factors: the Export Factor (in the exporter's country) who handles the client, and the Import Factor (in the importer's country) who handles credit assessment and collection from the buyer.

Venture Capital focuses on high-risk, early-stage companies with growth potential. Private Equity typically invests larger amounts in mature companies to restructure or expand them.

Obsolescence risk is the risk that the asset loses value faster than expected due to new technology or market changes. In an Operating Lease, this risk remains with the Lessor; in a Finance Lease, it is transferred to the Lessee.

Ratings of BBB- (or equivalent) and above signify adequate safety regarding timely payment and are termed "Investment Grade." Ratings below this (BB and lower) are "Speculative" or "Junk" grade.

Rupee Cost Averaging automatically adjusts the number of units purchased based on the NAV. When markets fall (NAV down), the fixed SIP amount buys more units, reducing the overall average cost of acquisition over time.

Term Insurance is a pure protection plan. It offers a high sum assured at a low premium because there is no savings or investment component, and no payout if the insured survives the term.

Section 80CCD(1B) provides an exclusive additional deduction of up to ?50,000 for contributions to the NPS Tier I account, over and above the ?1.5 Lakh limit under Section 80C.

In a Repo, the borrower sells securities to the lender with an agreement to repurchase them at a future date at a predetermined price. The securities act as collateral for the short-term loan.

A Rights Issue gives existing shareholders the "right" (but not obligation) to buy new shares in proportion to their existing holdings, usually at a discount to the market price.

Currency Futures are standardized contracts traded on exchanges (NSE, BSE, MSEI). In contrast, Currency Forwards are traded OTC between banks and clients.

Factors provide a comprehensive package including maintenance of the sales ledger, collection of dues from debtors, credit protection, and advisory services.

SEBI regulations classify Merchant Bankers into categories. Only Category I Merchant Bankers are authorized to act as Lead Managers for public issues (IPOs/FPOs). Other categories have restricted roles.

In an Interest Rate Swap (IRS), the principal is "Notional". It is never exchanged. Only the interest payment streams (e.g., fixed vs. floating) based on this notional principal are exchanged between the counterparties.

Financing on TReDS is "Without Recourse" to the MSME seller. Once the invoice is accepted by the buyer and financed, the financier takes the credit risk of the buyer. The MSME seller does not have to refund the money if the buyer defaults.

According to SEBI guidelines, Liquid Funds are debt funds that invest in instruments having a maturity of up to 91 days only. This minimizes interest rate risk.

Life Insurance is not a contract of indemnity because human life cannot be valued in monetary terms. The sum assured is paid regardless of the actual financial "loss" caused by death.

Under Auto Choice (LC-75), the equity exposure starts at 75% until age 35 and then gradually reduces every year as the subscriber ages, shifting towards safer debt assets.

Certificates of Deposit (CDs) can be issued in multiples of ?1 Lakh, subject to a minimum size of ?1 Lakh.

SEBI mandated that all categories of investors (Retail, HNI, QIB) must strictly apply through the ASBA mechanism to improve efficiency and reduce refunds.

FEDAI is an association of banks dealing in forex. It frames rules for the conduct of inter-bank forex business and issues guidelines to Authorized Dealers, under RBI's overall supervision.

SEBI made IPO Grading optional in 2014. Grading (on a scale of 1 to 5) reflects the assessment of the company's fundamentals, not the issue price or potential returns.

In Hire Purchase, the hirer is a bailee of the goods until the final installment is paid. The option to purchase is exercised only at the very end.

Sweat Equity acknowledges the non-monetary contribution (hard work, skills, IP) of founders and key employees. It is issued at a discount or for consideration other than cash.

Rating Shopping misleads investors about the true risk. SEBI has introduced strict disclosure norms to curb this, requiring issuers to disclose all ratings obtained, even those not accepted.

RBI permits eligible commercial banks to undertake Primary Dealership business departmentally (without forming a separate subsidiary), provided they meet specific prudential criteria.

This is the "Skin in the Game" requirement. Sponsors must hold at least 25% of the units for 3 years from the date of listing to ensure their continued commitment to the REIT.

Higher volatility increases the probability that the option will end up "In the Money" (profitable). Therefore, sellers demand a higher premium for taking on this higher risk. This applies to both Call and Put options.

For T-Bills and G-Secs in India, the convention is Actual/365. This means interest/discount is calculated based on the actual number of days elapsed divided by a 365-day year.

QIP allows listed companies to raise capital quickly from institutional investors without the lengthy regulatory process of a standard public issue.

Nostro (Latin for "Ours") refers to a bank's account held in a foreign bank in that foreign country's currency (e.g., SBI holding a USD account with Citibank NY).

FCI is the global representative body for factoring and receivables finance. GRIF provides a legal framework for international factoring transactions.

Unlike Facultative Reinsurance (case-by-case), Treaty Reinsurance is an automatic agreement covering a block of business.

Liquid funds are unique. For purchases up to cut-off time (usually 1:30 PM), the applicable NAV is of the day *immediately preceding* the day of application (Historical NAV), provided funds are realized.

PoPs are the first point of contact for NPS subscribers. Banks and financial institutions registered as PoPs facilitate account opening and upload contributions.

In this arrangement, the owner sells an asset to a lessor and immediately leases it back. This frees up cash (capital) from the asset for working capital needs, without losing possession.

Prudential norms dictate conservatism. If there are two ratings, the lower rating (indicating higher risk) must be used to calculate capital requirements.

SEBI raised the minimum ticket size for PMS from ?25 Lakh to ?50 Lakh in 2020 to ensure that only high-net-worth individuals with risk-taking capacity enter this segment.

Since real estate valuations do not change daily, SEBI mandates REITs to declare NAV semi-annually based on a full valuation of assets.

In a CDS, the buyer pays a premium to the seller. In return, the seller agrees to compensate the buyer if the underlying debt issuer defaults. It transfers credit risk.

Anchor Investors are allocated shares one day before the IPO opens to boost confidence. They have a lock-in period (partially 30 days, partially 90 days).

TREPS replaced CBLO in 2018 to provide a more robust tri-party repo platform managed by CCIL.

Current regulations mandate a 5-year lock-in period for ULIPs, during which the policyholder cannot withdraw funds without surrendering the policy (with charges).

An IDR is an instrument in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with SEBI) against the underlying equity of issuing company to enable foreign companies to raise funds from the Indian securities market. It is denominated in Indian Rupees.

To find GBP/INR, we multiply GBP/USD by USD/INR. (1.25 * 82.00 = 102.50). This calculation is used when a direct quote between two currencies is not available or to check for arbitrage opportunities.

An FRA is a forward contract on interest rates. It allows a borrower or lender to lock in an interest rate for a future period, thereby protecting themselves against adverse movements in interest rates.

Unlike traditional factoring where the supplier initiates the process to get funds, Reverse Factoring is buyer-led. A large buyer arranges a financing program with a bank/factor to pay its suppliers early (at a discount), improving the supply chain stability.

PIPE involves the selling of publicly traded common shares or some form of preferred stock or convertible security to private investors (usually institutional investors) at a discount to the market price.

Since a Financial Lease transfers substantially all risks and rewards to the lessee, accounting standards require the lessee to capitalize the asset (show it on the Balance Sheet) and claim depreciation, even though legal title is with the lessor.

A Rating Outlook assesses the potential direction of a long-term credit rating over the intermediate term (usually 6 months to 2 years). A "Negative" outlook means the rating may be lowered.

Interest rate risk is directly proportional to the duration (maturity) of the bonds held. Long-duration funds like Gilt Funds (10-year) are highly sensitive to interest rate changes compared to short-duration funds.

Under the Motor Vehicles Act, Third Party Liability insurance is mandatory for all vehicles plying on public roads. It covers liability for death/injury to a third party or damage to third-party property.

At retirement (age 60), a subscriber can withdraw up to 60% of the corpus as a tax-free lump sum. The remaining 40% must be used to purchase an annuity.

P-Notes are issued by registered Foreign Portfolio Investors (FPIs) to overseas investors who wish to be part of the Indian stock market without registering themselves directly.

Reverse Book Building is the mechanism used for price discovery when a company decides to delist its shares from the stock exchanges and buy back shares from the public.

The Non-Resident Ordinary (NRO) account is for managing income earned in India. Interest earned is taxable, and repatriation is limited (currently USD 1 million per financial year). NRE accounts are for foreign earnings and are fully repatriable.

ISIN is a 12-digit alphanumeric code that uniquely identifies a specific security (like equity share, debenture, etc.) admitted in the depository system.

Delta represents the rate of change of the option premium with respect to the change in the price of the underlying asset.

In Recourse Factoring, the client (seller) bears the risk of bad debts. In Non-Recourse Factoring, the Factor bears the risk if the customer fails to pay due to insolvency.

Throughout the lease term, the Lessor (the entity leasing out the asset) retains the legal title/ownership. The Lessee only gets the right to use the asset.

(Note: Recent Finance Act changes may have altered this for new investments, but historically/conceptually Indexation adjusts the buying price using the Cost Inflation Index (CII), lowering the tax burden.)

WLAs are set up, owned, and operated by non-bank entities incorporated under the Companies Act, authorized by RBI. They do not display any bank's branding.

If the REIT SPV has not opted for the lower tax regime (Section 115BAA), the dividend income is tax-free for unit holders. If SPV opts for lower tax, dividends are taxable for investors.

Although legal title passes, the economic substance is a collateralized loan. Thus, the borrower continues to recognize the securities in their Balance Sheet and recognizes a liability for the repurchase price.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) sets out the compliance norms for listed entities to ensure transparency and protect investor interests.

Resident individuals can remit up to USD 250,000 per financial year for permissible current or capital account transactions under LRS.

It serves as a declaration by the Lead Manager that they have exercised reasonable care in verifying the disclosures made in the offer document.

BillDesk is a payment gateway. The three RBI-licensed TReDS platforms are RXIL, Invoicemart, and M1xchange.

Under Section 56(2)(viib), if a startup raises capital at a valuation higher than its Fair Market Value, the excess amount is treated as income and taxed. (Note: Recent budgets have eased this for DPIIT registered startups).

Sovereign ratings assess the government's ability to repay debt. Macro-economic indicators (Debt, Forex, Stability) matter, not the stock performance of individual private firms.

The Act specifies that the FDI limit in the pension sector shall be the same as the limit in the insurance sector (currently 74%).

In the Referral Model, the bank only refers clients (leads) to the insurance company and provides physical infrastructure/data, receiving a referral fee. The actual selling is done by the insurer's staff.

T+1 means settlement occurs on the next working day following the trade day, releasing capital faster and reducing counterparty risk compared to T+2.

SEBI mandates CRAs to disclose their rating criteria, methodology, and philosophy to the public to maintain transparency and help investors understand how the creditworthiness was assessed.

FCI is the global representative body for factoring. GRIF provides a uniform legal framework for international factoring transactions between export and import factors.

In an Operating Lease, the risks and rewards of ownership remain with the Lessor. Therefore, the Lessor retains the asset on their books and claims depreciation as a tax deduction. The Lessee claims the lease rental as an expense.

VCFs are now classified as Category I Alternative Investment Funds (AIFs) under the SEBI (AIF) Regulations, 2012. The older VCF regulations were repealed.

Mortality charge is the cost of insurance protection. It is deducted from the fund value by cancelling units and depends on the sum assured and the age of the policyholder.

Tier II is an add-on voluntary savings account. Unlike Tier I, it offers liquidity as subscribers can withdraw money anytime. However, it generally does not offer tax benefits (except for a specific scheme for govt employees with a 3-year lock-in).

SEBI follows a slab-based structure where the maximum TER % decreases as the AUM slab increases, ensuring that the benefits of economies of scale are passed on to investors.

When a customer wants to convert foreign currency into rupees, the bank "buys" the FCY. The rate applied is the TT Buying Rate or Bill Buying Rate, which is lower than the selling rate.

PDs have a mandatory obligation to underwrite the issuances of Government Securities to ensure that the government's borrowing program is successful.

SEBI regulations mandate that at least 80% of the value of the REIT assets must be invested in completed and revenue-generating properties to minimize development risk for investors.

Put-Call Parity defines the relationship between the price of a European Call option and a European Put option with the same strike price and expiration. It does not strictly hold for American options due to early exercise possibilities.

Domestic factoring usually involves a Single Factor who manages the receivables of the seller and collects from the buyer within the same country.

SEBI AIF Regulations stipulate that Category I and II AIFs (including VCFs) shall be close-ended and have a minimum tenure of 3 years.

In a Wet Lease, the lessor provides the aircraft, complete crew, maintenance, and insurance. A Dry Lease involves only the aircraft.

NeSL is the first Information Utility registered with IBBI under the Insolvency and Bankruptcy Code, 2016. It stores financial information (debts/defaults) to facilitate insolvency resolution.

SID provides all necessary details specific to a scheme that an investor needs to make an informed decision. General information is in the SAI (Statement of Additional Information).

NCB is a reward for not making a claim in the preceding year(s). It applies only to the Own Damage component of the premium, not the mandatory Third-Party component.

For premature exit (before superannuation/60), 80% of the corpus must be used to buy an annuity, and only 20% can be withdrawn as a lump sum.

Banks act as corporate agents or distributors registered with AMFI (Association of Mutual Funds in India) to sell MF schemes and earn commission.

Market-wide circuit breakers are triggered by 10%, 15%, or 20% movement in either BSE Sensex or Nifty 50, leading to a temporary halt in trading.

Under the revised monetary policy framework, the Bank Rate is aligned with the MSF Rate (usually 25 bps above the Repo Rate). They move in tandem.

In Undisclosed Factoring, the buyer is not aware of the factoring arrangement. The seller collects the payment in the usual course and passes it to the factor.

Arbitrage exploits price inefficiencies between markets for risk-free profit.

The Primary Period is the basic non-cancellable term of the lease aiming at cost recovery + profit. The Secondary Period follows, often with nominal rent.

SEBI amended regulations to grant permanent registration to intermediaries like Merchant Bankers, subject to payment of fees and compliance.

SISFS aims to provide capital at the earliest stage to help startups validate their ideas and reach a level where they can raise angel/VC funding.

The Standardized Approach for Credit Risk under Basel norms uses external ratings to assign risk weights (e.g., AAA = 20%, BBB = 50% or 100%) to bank exposures.

Listed REITs/InvITs must maintain a minimum public shareholding (float) of 25% to ensure liquidity and broad ownership.

Initial Margin acts as a security deposit (good faith deposit) to ensure that parties fulfill their obligations, covering the maximum probable loss in a single day.

E-Kuber is the Core Banking Solution (CBS) of the RBI. The auction of Government Securities and T-Bills is conducted on the E-Kuber platform.