Definition: The Foreign Draft is a type of bank draft, which is used to send money to the foreign countries. The foreign draft can be purchased from the commercial banks, which is prepared in the local currency and then is forwarded to the intended institution in any country, where the currency is converted on the basis of the current exchange rate. The individual or a firm … [Read more...] about Foreign Draft
Leveraged Buyout
Definition: Leveraged Buyout or LBO is the transaction wherein the acquisition of another company or a single asset is financed through the combination of equity and the significant amount of debt or borrowed funds. In other words, Leveraged buyout is the acquisition of another company by using the debt as the major or primary source of financing. Usually, the ratio used in … [Read more...] about Leveraged Buyout
Closed-End Fund
Definition: The Closed-End Fund or CEFs is essentially the publicly traded investment company that issue the fixed number of shares through the initial public offerings (IPO). In other words, the investment companies that raise their fixed amount of capital by trading their shares on an exchange, just like stock, is called as a closed-end fund. The unit capital of a … [Read more...] about Closed-End Fund
Open-End Fund
Definition: The Open-End Fund is the type of mutual fund, that has no restriction on the number of units the fund issues. In other words, an investor can issue and redeem its shares continuously, as there is no limit on the number of units the open-end fund will issue. The Open-End Fund is convenient for the investors since it issues as many shares as required by them and … [Read more...] about Open-End Fund
Line of Credit
Definition: The Line of Credit is the agreement between the financial institution (bank) and the individual (company or government) with respect to the maximum loan amount that an individual can borrow from a bank any time he wants, provided the loan amount does not exceed the set limit in the agreement. In other words, Line of credit is the credit limit of customer, i.e. … [Read more...] about Line of Credit
Amortization Schedule
Definition: The Amortization Schedule is the tabular representation of the periodic payments (principal + interest) made against the loan or mortgage. This schedule clearly differentiates the portion of payment that belongs to the interest amount and the portion that relates to the principal amount and helps to know the principal balance left after each payment. The term … [Read more...] about Amortization Schedule
Co-Branded Credit Cards
Definition: The Co-Branded Credit Cards are the credit cards issued by the banks in joint sponsorship with the retail merchants. In other words, a card issued jointly by two parties, wherein one is the lending institution (bank), and the other is a non-financial group (retail merchant). Co-Branded Credit Cards are often used by hotels, airlines, big retail chains with the … [Read more...] about Co-Branded Credit Cards
Net Demand and Time Liabilities
Definition: The Net Demand and Time Liabilities or NDTL shows the difference between the sum of demand and time liabilities (deposits) of a bank (with the public or the other bank) and the deposits in the form of assets held by the other bank. In other words, the net demand and time liabilities of a bank can be calculated by using the following formula: Bank’s NDTL = … [Read more...] about Net Demand and Time Liabilities
Liquidity Adjustment Facility
Definition: The Liquidity Adjustment Facility or LAF is the principal operating monetary policy tool that allows banks to borrow money through repurchase agreements. This means, in order to meet short-term cash needs, bank, borrow money against government approved securities with an agreement to repurchase the same at a predetermined rate and date. The liquidity adjustment … [Read more...] about Liquidity Adjustment Facility
Marginal Standing Facility
Definition: The Marginal Standing Facility (MSF) is the rate at which the scheduled commercial banks borrow funds fortnight from the Reserve Bank of India against the government approved securities. Now the question arises, why to use the marginal standing facility when banks can borrow funds through a Repo Rate? The need for MSF arises, to meet the short-term emergency … [Read more...] about Marginal Standing Facility