SNAP 2015 GK Preparation
SNAP 2015 GK Preparation series. GK is a differentiator when it comes to SNAP. Most of the aspirants don’t prepare for the section and end up scoring below expectations. Though one cannot prepare for GK in a month, one can always do things that are enough to do reasonably well in the test. One can prepare topic wise, go through past papers and find the commonly asked GK topics and even take calculated guesses in the test. To help you prepare for SNAP 2015 GK section, we are going to write a series of articles focusing on GK. Every article will also be available in PDF format for download and easy viewing. Let’s dive into our #10 article in this series: Banking and Economic Terms.
It is seen that candidates are generally not aware of banking and economics terms. This is an important topic not only for the GK section but for the interview stage as well. Go through the below pointers and update your knowledge.
Reserve Bank of India (RBI)
One of the primary functions of the RBI is to control the supply as well as the cost of credit i.e. how much money is available for the industry or the economy and what is the price that the economy has to pay to borrow that money. This is nothing but liquidity and interest rates. So, RBI has a role to play to control these two things because eventually these two have an impact on the inflation and growth in the economy. To control this, RBI uses various tools:
Repo rate
Repo rate is a rate at which banks borrow from RBI for short periods up to 7 or 14 days but predominantly overnight. The repo rate is simply the cost of credit for the bank. This becomes a floor below which the short-term interest rates don’t go. Higher the repo rate the higher is the cost of short-term money. This means that at higher repo rates the economy growth may slow down whereas at lower repo rate the economy growth may get enhanced.
CRR (Cash Reserve Ratio)
Under CRR, a certain percentage of the total bank deposits has to be kept in the current account with RBI which means banks do not have access to that amount for any economic activity or commercial activity. Banks can’t lend the money to corporates or individual borrowers or use that money for investment purposes. So, that CRR remains in current account and banks don’t earn anything on it.
SLR (Statutory Liquidity Ratio)
SLR is the amount of money that is invested in certain specified securities – predominantly central government and state government securities. This percentage is of the total bank deposits available for a particular bank. With SLR, the bank will earn interest on the investment as compared to CRR where the bank doesn’t earn any money.
| Current Rates | Value |
| Repo Rate | 6.75% |
| Reverse Repo Rate | 5.75% |
| Cash Reserve Ratio | 4% |
| Statutory Liquidity Ratio | 21.5% |
Other Financial Terms
| Sr. No. | Term | Definition |
| 1 | ABS | Asset-Backed Securities. It is a type of security that is backed by a pool of bank loans, leases, and other assets. |
| 2 | ASBA | Application Supported by Blocked Amount. It is a process developed by SEBI for applying to an IPO. In ASBA, an IPO applicant’s account doesn’t get debited until shares are allotted to him. |
| 3 | CAC | Capital Account Convertibility. It is the freedom to convert local financial assets into foreign financial assets and vice versa. This means that capital account convertibility allows anyone to freely move from local currency into foreign currency and back, or in other words, transfer of money from current account to capital account |
| 4 | CAMELS | CAMELS is a type of Bank Rating System. (C) stands for Capital Adequacy, (A) for Asset Quality, (M) for Management ,(E) for Earnings, (L) for Liquidity and (S) for Sensitivity to Market Risk. |
| 5 | CAR | Capital Adequacy Ratio. It’s a measure of a bank’s capital. Also known as “Capital to Risk Weighted Assets Ratio (CRAR)”, this ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. It is decided by the RBI. |
| 6 | CIBIL | Credit Information Bureau of India Limited. CIBIL is India’s first credit information bureau. Whenever a person applies for new loans or credit card(s) to a financial institution, they generate the CIBIL report of the said person or concern to judge the credit worthiness of the person and also to verify their existing track record. CIBIL maintains the borrower’s history |
| 7 | ECB | External Commercial Borrowings. This means taking a loan from another country. |
| 8 | EPS | Earnings Per Share means the amount of annual earnings available to common stockholders as stated on a per share basis. |
| 9 | FCCB | Foreign Currency Convertible Bond. A type of convertible bond issued in a currency different from the issuer’s domestic currency. |
| 10 | FPO | Follow on Public Offerings: An issuing of shares to investors by a public company that is already listed on an exchange. An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process. |
| 11 | IPO | Initial Public Offerings is defined as the event where the company sells its shares to the public for the first time. |
| 12 | LIBOR | London InterBank Offered Rate. An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. |
| 13 | NBFCs | NBFC is a company which is registered under Companies Act, 1956 and whose main function is to provide loans. NBFC cannot accept deposit or issue demand draft like other commercial banks |
| 14 | NPA | Non-Performing Asset. It means once the borrower has failed to make interest or principal payments for 90 days, the loan is considered to be a non-performing asset. |
| 15 | SEBI | Securities and Exchange Board of India. SEBI is the primary governing/regulatory body for the securities market in India. All transactions in the securities market in India are governed and regulated by SEBI |
| 16 | SWIFT | Society for Worldwide Interbank Financial Telecommunication. It operates a worldwide financial messaging network which exchanges messages between banks and other financial institutions. |
| 17 | Teaser Loans | It’s a type of home loans in which the interest rate is initially low and then grows higher. Teaser loans are also called terraced loans. |
| 18 | TRIPS | Trade Related Intellectual Property Rights is an international agreement administered by the World Trade Organisation (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members. |
Source for terms: bankersadda.com
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Read the entire series here: SNAP 2015 GK Preparation
