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Rate of Return: A percentage showing the amount of investment gain or loss against the initial investment.
Real Interest Rate: The net interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.
REAL EFFECTIVE EXCHANGE RATE (REER): The multilateral trade weighted real effective exchange rate (REER) is a weighted average of real exchange rate in respect of basket of countries with which the country trades; the real exchange rate is obtained by deflating the nominal exchange rates with the relative price differential between the domestic and foreign countries. Thus REER is the weighted average of NEER adjusted by the ratio of domestic price to foreign prices. It is one of the most commonly used indicators of international competitiveness. Since price differential between the trading countries is a factor determining exchange rate of the respective countries, price -adjusted measure (REER) is considered more effective for policy making. REER is a way of measuring the price of foreign goods not just in currency- adjusted terms but also in price level adjusted terms. The Reserve Bank of India presently compiles and publishes six -country and 36- country indices of NEER and REER.
RECESSION: Refers to business condition with mild tapering off of economic activity not qualifying to be called phase of depression. The text book definition of recession is two consecutive quarters of declining out put. Recession can also be used to describe any period in which growth falls below an economy's trend growth rate.
Redemption Value: The value of a bond when redeemed.
REGULATION: Regulation refers to codification of sound principles, norms and practices in relation to financial institutions or banks.
REGULATORY CAPITAL: As per the Basel Accord Regulatory Capital refers to the minimum capital required to be maintained by the bank (regulatory minima) against its risk weighted assets as defined in the 1988 capital accord with subsequent amendments and prescribed by the national supervisor.
Reinvestment Value: The rate at which an investor assumes interest payments made on a bond which can be reinvested over the life of that security.
Relative Strength Index (RSI): A stock’s price that changes over a period of time relative to that of a market index such as the Standard & Poor’s 500, usually measured on a scale from 1 to 100, 1 being the worst and 100 being the best.
Repurchase Agreement: An arrangement in which a security is sold and later bought back at an agreed price and time.
REPO (REPURCHASE OBLIGATION): Repo rate is the rate at which our banks borrow rupees from RBI. This facility is for short term measure and to fill gaps between demand and supply of money in a bank .when a bank is short of funds they they borrow from bank at repo rate and if bank has a surplus fund then the deposit the funds with RBI and earn at Reverse repo rate OR, The Reserve Bank manages day to day liquidity or short term mismatches under different financial market conditions through repo and reverse repo auctions. This, in addition to bringing in stable condition in the money market, sets the pace for short term interest rate. Repo involves two legs of transactions. In the first leg RBI buys securities and injects liquidity by paying cash to the seller. In the second leg RBI releases securities against receipt of money from the counter party. Repo provides a collateralised-funding alternative. The RBI has enabled NBFCs, mutual funds, housing finance companies and insurance companies to undertake repo transactions, through gilt accounts maintained with the custodians.
Resistance Level: A price at which sellers consistently outnumber buyers, preventing further price rises.
Return: Amount of investment gain or loss.
Rescheduling of Payment: Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.
Restrictive Endorsement: Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.
REVERSE REPO: is the rate which is paid by RBI to banks on Deposit of funds with RBI.A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.To borrow from RBi bank have to submit liquid bonds /Govt Bonds as collateral security ,so this facility is a short term gap filling facility and bank does not use this facility to Lend more to their customers.
OR, This is opposite of the repo transaction. In the first leg RBI sells securities and absorbs liquidity. In the second leg RBI buys back the securities and releases value equivalent to the amount given in the first leg plus interest at reverse repo rate on the amount given in the first leg. This instrument is used for absorbing liquidity from the system for short periods.
Revenue Budget
  • Revenue spending (revenue expenditure) takes place from this budget.
  • Salaries of government employees and military staff, perks for ministers, office furniture, grants to state governments, subsidies, interest to be paid on loans taken and pensions for ex-defense staff are all accounted for here and referred to as revenue spending.
  • Any expenditure required for the normal running of the government.
  • This spending must be financed from the revenue that the government earns in the form of taxes (corporate, income), duties (excise, custom), receipts, fees, interest and dividends (if the government makes investments).
  • Capital Budget
  • Capital spending (capital expenditure) refers to the money spent on creating assets (roads, highways, dams), buying land or buildings, purchasing machinery and equipment.
  • This spending is financed from loans from the public (market loans), from the Reserve bank of India (the country’s central bank), from foreign governments or international organizations like the World Bank.
  • Also included are any investments made by the government in shares or other such instruments.
  • Loans the government earlier gave other states or Union Territories and are now repaid find their way here.
RIGHT TO INFORMATION ACT 2005: The Government of India has enacted the Right to Information Act, 2005 which has come into effect from October 13, 2005. The Right to information under this act is meant to give to the citizens of India access to information under control of public authorities to promote transparency and accountability in these organisations. The Act, under sections 8 and 9, provides for certain categories of information to be exempt from disclosure. The Act also provides for appointment of a Chief Public Information officer to deal with requests for information. The Reserve Bank of India is a public authority as defined in the Right to Information Act 2005. As such, the Reserve Bank of India is obliged to provide information to members of public.
Right of Appropriation: As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.
Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.
Rights Issue: An offer by way of rights to current holders of securities that allows them to subscribe for securities in proportion to their existing holdings.
RISK ASSET RATIO: In 1988 Basel Committee on Banking Supervision prescribed a common minimum capital standard to banking industry of group of 10 countries (G-10) in the context of the need for management of cross border capital flows following oil crisis and international debt crisis. In the adoption of Basel Committee frame work on capital adequacy norms taking into account various element of risks, the RBI decided to introduce a Risk Asset Ratio system for banks in India as a capital adequacy measure. In this system, the balance sheet assets, non-funded items and other off-balance sheet exposures are assigned weights according to perceived risks. Banks have to maintain unimpaired minimum capital funds equivalent to prescribed ratio on the aggregate of risks weighted assets and other exposures continuously. The ratio of capital to risk weighted assets is known as CRAR.
RISK ADJUSTED RETURN ON CAPITAL (RAROC): An approach to relate the return on capital to the riskiness of the investment. Using a hurdle rate (i.e. expected rate of return) a lender can use the RAROC principle to set the target price of a transaction. Risk Adjusted Return on Capital (RARCO) is a concept used in Credit Risk management and is a risk based profitability measurement for analysing risk-adjusted financial performance and providing a consistent view of profitability across portfolios. It is defined as the ratio of risk adjusted return to economic capital or Return on Capital adjusted for expected losses.
RISK BASED SUPERVISION (RBS): This exercise essentially involves continuous monitoring and evaluation of risk profiles of the supervised institutions in relation to their business strategy and exposures. The basis of the instruments of RBS will be the supervisory tools used for on-site examination and off-site monitoring under the CAMELS. Risk assessment of the bank is carried out before the on-site inspection process. The strengths and vulnerabilities are identified on an on-going basis. A bank specific supervisory programme is drawn up on the basis of inputs gathered with the help of supervised bank. The periodicity of the inspection is determined having regard to the risk profile of the bank and it covers all identified high- risk areas.
RISK MANAGEMENT: The banks operating in the liberalised environment are exposed to different kinds of risks, which can be broadly grouped into business risk and control risk. The important business and control risks are (1) credit risk arising from nature of their business activity (2) market risk in the form of potential erosion in the income or market value arising from the interest rate or foreign exchange rate or equity price or commodity price variation, (3) liquidity risk arising from the inability to meet their liabilities whenever they fall due because of mismatch of flow of funds & (4) operational risks emanating from failed internal process, people or system or from external events and (5) information and technology risks. The banks are required to put in place appropriate risk management policies.
Risk-Averse, Risk-Neutral, Risk-Taking:
Risk-averse describes an investor who requires greater return in exchange for greater risk.
Risk-neutral describes an investor who does not require greater return in exchange for greater risk.
Risk-taking describes an investor who will accept a lower return in exchange for greater risk.
RTGS SYSTEM: The acronym 'RTGS' stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction.

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