Face Value/ Nominal Value: The value of a financial instrument as stated on the instrument. Interest is calculated on face/nominal value.
FCCB: A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued in a currency different than the issuerâ€™s domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A company may issue an FCCB if it intends to make a large investment in a country using that foreign currency.
FIAT MONEY: Refers to money, like the currency of the present day, without intrinsic value but decreed (by fiat) to be legal tender by the Government. Fiat money is accepted only as long as people have confidence that it will be accepted as medium of exchange.
FINANCIAL INCLUSION: Refers to the delivery of banking service at an affordable cost to the vast sections of disadvantaged and low income groups of the population. The purpose of financial inclusion is to provide access to banking, access to affordable credit and access to free information on money matters. This concept has become a part of public policy so as to make available banking and payment services to the entire population without discrimination. The primary aim is to avoid the pitfalls of financial exclusion in the form of social tension arising from lack of empowerment of the low- income strata of the population.
FINANCIAL MARKETS: Financial markets comprise of financial assets or instruments and financial institutions involved in movements of funds. The important segments of financial markets are
- organised credit market dominated by commercial banks,
- the money market with call/notice money segments forming a significant portion,
- capital market consisting of primary and secondary equity markets and term lending institutions,
- debt market dealing in public sector bonds and corporate debentures,
- gilt edged market dealing in government securities,
- housing finance market,
- hire purchase, leasing finance and other non-banking financial companies,
- insurance market,
- informal credit market and
- foreign exchange market.
FINANCIAL STABILITY: Financial stability broadly refers to the smooth functioning of the key elements (like financial institutions and markets) that constitute the financial system. It describes a steady state in which the financial system effectively performs its key economic functions such as allocating resources and spreading risks as well as settling payments. Financial stability thwarts financial crises.
FINANCIAL SYSTEM: This consists of financial institutions, financial instruments and financial markets, providing an effective payments and credit system and channelling of funds from the savers to the investing sectors in the economy. Financial institutions or financial intermediaries mobilise savings of the community and ensure efficient allocation of these savings to high yielding investment projects so that they can offer attractive and assured returns to savers and this process give rise to money and other various financial assets. Standing at the centre of the financial system, the Reserve Bank's aim is to maintain financial stability in the country as an essential ingredient for healthy, safe and successful economy.
FISCAL POLICY: Refers to Government's policy towards taxation, public debt, public expenditure, appropriation and similar matters having an effect on the private business and economy of the nation as a whole. Taxation and public expenditure policies which are at the centre of fiscal policy, are adopted to help dampen the business cycle swings and contribute to the maintenance of growing economy with high employment and price stability. Fiscal policy is often used to correct the nation's saving investment imbalance and recessionary trends that cannot be managed by monetary policy. Fiscal policy directly affects the financial resources and purchasing power in the hands of the public and hence is an important determinant of aggregate demand.
FISCAL DEFICIT: The difference between revenue receipts plus non debt capital receipts on one side and total expenditure including loans, net of repayment, on the other side. In other words, this is the budget deficit plus borrowings and other liabilities.
Fixed-income Securities: Investment vehicles that offer a fixed periodic return.
Fixed Rate Bonds: Bonds bearing fixed interest payments until maturity date.
Floating Rate Bonds: Bonds bearing interest payments that are tied to current interest rates.
Factoring: Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.
Foreign Banks: Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.
Forfeiting: In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfeiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.
Forgery: when a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.
FOREIGN EXCHANGE ASSETS OF BANKING SECTOR: Refers to net foreign exchanges of RBI comprising gold coin and bullion, foreign securities and balances held abroad offset by A/C NO:1 of International Monetary Fund with RBI. Foreign currency assets of other banks include balances held abroad in Nostro account etc and investments in eligible foreign securities and bonds less overseas borrowings of banks and non-resident repatriable foreign currency fixed deposits with banks.
FOREIGN EXCHANGE MANAGEMENT ACT (FEMA): Replacing the Foreign Exchange Regulation Act (FERA) the Foreign Exchange Management Act was enacted in 1999, the provisions of which are aimed at consolidating and amending the law relating to foreign exchange transactions with a view to facilitate external trade and payments and development of foreign exchange market. This change was brought out in the context of certain developments in the external sector like sizable increase in the foreign exchange reserve, growth in foreign trade, rationalisation of tariffs, current account convertibility, liberalisation of Indian investment abroad, increased access to external borrowings and investment in Indian stock market by foreign institutional investors. While FERA laid stress on conservation of foreign exchange and its proper utilisation, FEMA aims at facilitating external trade and promoting orderly development of forex market. FERA was a criminal law where as FEMA is a piece of civil law.
FOREIGN EXCHANGE MARKET: Under the provisions of RBI Act, the RBI authorises on application, any person to deal in foreign exchange or in foreign securities as authorised dealer. The major participants in the forex market are banks which have been authorised to deal in foreign exchange. Industrial Development bank of India, Industrial Finance Corporation of India, Industrial credit and investment Corporation of India have also been licensed to undertake non-trade transactions incidental to the main business activities. The RBI also issues licences to certain individuals, established firms and hotels to deal in foreign currency and they are known as money changers.
FOREIGN EXCHANGE RESERVES OF RBI: Accretion to the foreign exchange reserves of the RBI comes from purchase of U.S. Dollar from authorised dealers, aid and loan receipts on Government of India account, International Monetary Fund transactions, purchase of foreign currencies from international institutions and foreign central banks, earnings in the form of interest and discount. The outgo will be mainly on account sale of US. Dollar to authorised dealers on account of Bank's intervention in the market and International Monetary Fund transactions. The bank's foreign reserves are held mainly in balances with foreign central banks, overnight investments, investment in treasury bills, fixed deposits with Bank for International Settlements and major foreign commercial banks, Certificates of Deposits issued by the banks and investments in long term securities of foreign governments, IBRD and Asian Development Bank.
FORWARD EXCHANGE RATE: A forward exchange rate is a rate of exchange which is fixed immediately, by means of a forward exchange contract, but the exchange transaction to which it is applicable would take place at some future date as agreed upon. A forward exchange contract is a firm and binding bargain between a bank and its customer, or between two banks, under which one party undertakes to deliver and the other to receive a fixed sum in foreign currency against payment in Indian rupees, on a fixed future date, or between two fixed dates, at a pre determined rate fixed at time the contract is made. Forward exchange operations enable the creditor who has to receive payment of his debt, in terms of a foreign currency, at a future date, to know exactly the value of money he has to receive in terms of his own currency. Similarly, it enables a debtor who has to pay certain amount, at some future date, in terms of a foreign currency, to know precisely the probable cost t
Fundamental Analysis: Research to predict stock value that focuses on such determinants as earnings and dividends prospects, expectations for future interest rates and risk evaluation of the firm.
Future Value: The amount to which a current deposit will grow over a period of time when it is placed in an account paying compound interest.
Future Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will grow over a period of time when it is placed in an account paying compound interest.
Futures Contract: A commitment to deliver a certain amount of some specified item at some specified date in the future.