Identification: When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.
IMPORT COVER: Level of a country's international reserves in relation to its average monthly import bill. Three months import cover is regarded as an adequate insurance against severe payment difficulties.
IMPOSSIBLE TRINITY: It stands for theoretical impossibility of having a macroeconomic situation in a country in which all the following three aspects together can coexist, namely (1) pegged exchange rate (2) free capital flows and (3) independent monetary policy. Due to conflicting objectives, an economy cannot achieve monetary independence, exchange rate stability and full financial integration by allowing free capital flows. Free capital flows will affect exchange rates; monetary independence also would affect exchange rates (increase or decrease in domestic money supply will affect exchange rates). Likewise, if a country tries to maintain fixed exchange rate, it has to absorb all the inflows of foreign capital, which in turn will affect the money supply. This will affect the monetary independence because of disturbance to the monetary policy stance.
Indemnifier: When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others' actions.
Indemnity: Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.
Income: The amount of money an individual receives in a particular time period.
Index Fund: A mutual fund that holds shares in proportion to their representation in a market index, such as the S&P 500.
INDIAN FINANCIAL NET WORK (INFINET): This was set up by the Reserve Bank in 1999 through the Institute for Development and Research in Banking and Technology (IDRBT). The purpose is to establish an efficient, safe and dependable communications backbone to cater to the networking requirements of public sector banks and financial institutions. All fund based operations such as electronic fund transfers, centralised fund management scheme, anywhere banking, government securities trading, ATM/Credit transactions, currency chest accounting are done through this.
INDIRECT QUOTATION: Foreign exchange rate which values the domestic currency in terms of the foreign currency. For example, in London the value of one pound expressed in terms of other currency.
INFLATION: Inflationary price movement means a rise in the comprehensive price index, say, index of wholesale prices. The implication of inflation is that the value of money tends to grow unstable. The inflationary situation is generally featured by (a) rise in prices and cost of living (b) excess of money supply (c) prevalence of restraints on consumption and (d) administrative controls. The classical type of inflation occurs when the money supply increases faster than the output of goods or services. Yet another type of inflation emerges out of the operation of factors of cost evidenced by a more or less constant rise in cost of production which is passed on to consumers.
INFLATION MEASUREMENT: Inflation rate forms part of important macro economic indicators used by policy makers particularly central bankers in policy formulation. Inflation could be measured through three sets of price indices namely, the Whole price indices (WPI), implicit National Income Deflator and Consumer Price Indices (CPI). The WPI is compiled for all commodities as well as major groups and individual commodities and is published on a weekly basis since 1942. Weights are assigned to the commodities/sub-groups/major groups on the basis of the value of the whole sale market transactions at the time of adoption of the base year. The commodities are classified under 3 major groups, (1) primary articles, (2) fuel, power, light and lubricants and (3) manufactured products. This index because of the good frequency of availability helps continuous monitoring. The National Income Deflator, a comprehensive index is derived as a ratio of GDP at current prices to GDP in real terms. It encompasses all the economic activities including services. The CPI reflects the retail prices of selected goods in the commodity market of homogeneous group of consumers. Consumer price indices are separately computed for (1) industrial workers (2) urban non-manual employees and (3) agricultural labourers. The major groups covered are food, pan supary, tobacco, intoxicants, fuel, housing, clothing, bedding, and footwear and miscellaneous items.
INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY (IDFC): For the purpose of fostering the growth of private capital flow for infrastructure facilities like power, roads, railways, highways, waterways, irrigation etc, on a commercially viable basis, the IDFC was established in Chennai as a Limited company in January 1997. It acts as a direct lender and a refinancing agency. The Government of India and Reserve Bank hold 40 percent stake in the company. Other institutions who have participated in the share capital are Industrial Credit and Investment Corporation of India, Unit trust of India and Housing Development Finance Corporation Ltd. The company also promotes debt securitisation and offers credit guarantees.
Initial Public Offering (IPO): An event where a company sells its shares to the public for the first time. The company can be referred to as an IPO for a period of time after the event.
Inside Information: Non-public knowledge about a company possessed by its officers, major owners, or other individuals with privileged access to information.
Insider Trading: The illegal use of non-public information about a company to make profitable securities transactions
Insolvent: Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.
Interest Warrant: When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.
International Banking: involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.
Introduction: Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.
Intrinsic Value: The difference of the exercise price over the market price of the underlying asset.
Investment: A vehicle for funds expected to increase its value and/or generate positive returns.
Investment Adviser: A person who carries on a business which provides investment advice with respect to securities and is registered with the relevant regulator as an investment adviser.
IPO price: The price of share set before being traded on the stock exchange. Once the company has gone Initial Public Offering, the stock price is determined by supply and demand.
INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (ICAAP): This is intended to ensure that the capital held by the Bank is commensurate with the Bank's overall risk profile. The ICAAP takes into account effectiveness of Bank's risk management system in identifying, assessing, measuring, monitoring and managing various risks. ICAAP comprises all of the Bank's procedures and measures designed to ensure:
- appropriate definition and measurement of risks and
- appropriate level of internal capital in relation to Bank's risk profile.
INTEREST RATE: Interest rate is the price of borrowing or "renting" money as an asset with its purchasing power services. As the "renting" of money creates credit, interest is the price of credit. The price of money is the cost of commodity or service bought with money.
INTERVENTION: Broad definition of intervention is any sale or purchase of foreign exchange against domestic currency in the exchange market by the Central Bank. Defined narrowly, Central Bank transactions in the foreign exchange market should be called "intervention" only if (i) they are sterilized, i.e. are offset by Central bank transactions that nullify any impact on domestic money creation (unsterilised intervention would then be considered monetary policy); (ii) the purpose is to influence the exchange rate. Essentially, intervention consciously seeks to stem the adverse current market trend.
ISSUE DEPARTMENT: Issue Department of the Reserve Bank of India is entrusted with the responsibility of obtaining currency notes and coins from the currency printing presses and mints and distributing them to the treasuries, sub-treasuries and the bank's agencies and sub-agencies, maintaining currency chests and small coin depots, removing from chests old and unserviceable notes for destruction in due course after examination. Issue Department is comprised of two sections, the General resource section which arranges for supply of notes and coins from the presses and Government Mint and their withdrawal from circulation, settlement of claims on defective notes, preparation of currency circulation account. The cash section handles the cash transaction and the actual receipt and remittances of cash.