Financial Markets

📊 High-Yield Data & Statistical Fact Sheet

Cue Words	Notes
Money Market vs Capital Market	Money Market: Short-term debt instruments (≤ 1 year) for working capital. Regulated by RBI. Capital Market: Long-term debt and equity (> 1 year) for expansion capital. Regulated by SEBI.
Treasury Bills (T-Bills) Maturities	Issued at discount and redeemed at par by RBI on behalf of Central Government only. 3 Tenures: 91-day, 182-day, and 364-day. Minimum amount: ₹25,000.
Cash Management Bills (CMBs)	Introduced in 2010 for temporary cash flow mismatches of Central Govt with tenure less than 91 days.
Ways and Means Advances (WMAs)	Temporary advances by RBI under Section 17(5) of RBI Act to bridge receipt-expenditure timing mismatches. Duration: 10 working days (Centre) and 14 working days (States). Replaced ad hoc T-Bills in 1997.
Certificate of Deposit (CD)	Negotiable instrument issued by SCBs (excl. RRBs/Co-ops) to raise short-term funds (min ₹1 Lakh, maturity 7 days to 1 year).
Commercial Paper (CP)	Unsecured short-term promissory note issued by corporates/PDs (min ₹5 Lakh, maturity 7 days to 1 year). Introduced 1990.
Masala Bonds Features	Rupee-denominated bonds issued overseas by Indian entities (corporates, REITs, InvITs). Exchange Risk: Borne entirely by the foreign investor/lender, protecting Indian borrowers from rupee depreciation. 1st Masala Bond issued by IFC in 2014 (₹1,000 crore). Maturity: 3 yrs (≤\50M) or 5 yrs (>\50M). Issued only in FATF/IOSCO member jurisdictions.
Sovereign Gold Bonds (SGB)	Issued by RBI on behalf of GOI in gold grams. Fixed tenure: 8 years (exit option after 5th year). Interest: 2.5% per annum on principal amount. Interest taxable; capital gains at redemption tax-exempt. Limits: Min 1 gram, Max 4 kg/year for individuals. Eligible as collateral for bank loans.
SEBI & SAT Setup	SEBI: Statutory powers granted on 30 January 1992 under SEBI Act 1992. Merged FMC in 2015. SAT: Statutory tribunal under SEBI Act 1992. Appeals against SAT go directly to Supreme Court. Current Chairperson: Tuhin Kanta Pandey (former Finance Secretary), assumed office 1 March 2025 for a 3-year term, succeeding Madhabi Puri Buch.
BSE SENSEX & NSE NIFTY	BSE (1875): Oldest stock exchange in Asia. SENSEX tracks 30 blue-chip companies (Base year: 1978–79 = 100). NSE (1992): 1st fully automated dematerialized exchange. NIFTY tracks 50 companies.
IFSCA GIFT City	Statutory unified regulator for financial products in IFSCs under IFSCA Act 2019 (est. April 2020 at GIFT City, Gandhinagar). Unifies regulatory oversight previously fragmented among RBI, SEBI, PFRDA, and IRDAI. 2026 updates: Rolled out a 7-pillar cybersecurity/resilience framework for GIFT IFSC market infrastructure institutions (effective 1 Apr 2026); signed an MoU with South Korea's Financial Services Commission; relaxed IIBX gold/silver import eligibility norms. 2022 Union Budget 2022-23 origin announcements for GIFT-IFSC: world-class foreign universities/institutions to be allowed to be set up at GIFT-IFSC (free from domestic regulatory restrictions, to offer courses in Fintech, financial management, etc.); an International Arbitration Centre to be set up for speedy settlement of disputes under international jurisprudence.
NBFC-MFI Qualifying Assets & Loan Definition	Micro finance loan: Collateral-free loan to a household with annual income up to ₹3 lakh (RBI Directions 2022). Household = individual family unit (self, spouse, unmarried children). Qualifying asset norm: Min 75% of NBFC-MFI's total assets must be micro finance loans; other NBFCs capped at 25% of total assets for microfinance loans. Loan repayment cap: Max 50% of monthly household income across all loan obligations (collateral-free + collateralised).
Malegam Committee (2011) & NBFC-MFI Origin	Constituted post-2010 Andhra Pradesh MFI crisis (coercive recovery, borrower suicides). Recommended a distinct NBFC-MFI category, margin/interest-rate caps, and an SRO-based grievance redressal system.
SHG-Bank Linkage — 3 Models	Model I: NABARD–Bank–SHG (direct, no NGO). Model II: NABARD–Bank–SHG with NGO as facilitator (most popular). Model III: NABARD–Bank–NGO–SHG (NGO as financial intermediary). SHG loans: no collateral required; savings-to-loan ratio 1:1 to 1:4 (higher for matured SHGs). 100% refinanced by NABARD.
IRDAI — Structure & Key Numbers	Constituted 2000 under IRDA Act 1999, following Malhotra Committee (1994) recommendations. FDI cap in insurance: 26% (2000) → 49% (2015) → 74% (2021-22 Budget) → 2025 100% (Union Budget 2025-26, for companies investing the entire premium in India); 100% FDI in insurance intermediaries (2019). Headed by Chairperson + 5 whole-time + 4 part-time Members. Regulates Life, General, Standalone Health insurers, Reinsurers, and intermediaries (agents, brokers, TPAs, surveyors).
Insurance Penetration & Density	Penetration = insurance premium ÷ GDP (%). Density = premium ÷ population (per capita, in USD). India's insurance sector nationalised via LIC Act 1956 (life) and GIBNA 1972 (general, effective 1 Jan 1973 — 4 subsidiaries: National, New India, Oriental, United India, under holding company GIC).
Reinsurance & GIC Re	GIC Re: India's sole national reinsurer; recipient of mandatory statutory cessions from every general insurer (currently 5%, down from 20% pre-2006-07). Market has ~11 reinsurers today (GIC Re + private/foreign reinsurer branches + Lloyd's India), regulated by IRDAI.
PFRDA — NPS Architecture	Established 2003; regulates National Pension System (NPS, launched 2003, opened to all citizens 2009) and pension funds. Key intermediaries: CRA (Central Recordkeeping Agency — issues PRAN), PFMs (Pension Fund Managers — invest subscriber funds), PoPs (Points of Presence), Trustee Bank, Custodian.
Primary Dealers (PDs) in G-Secs	RBI-authorised entities (introduced 1995) that underwrite/market-make in Government Securities; commit to bidding in primary auctions, provide firm buy-sell quotes, and support secondary-market liquidity.
Repo, Reverse Repo & Tri-Party Repo	Repo: Sale of security with agreement to repurchase at a future date/price — collateralised borrowing; rate charged = Repo Rate. Reverse Repo: Mirror transaction from the lender's side (buying securities + lending funds). Tri-Party Repo (introduced Aug 2017): A Tri-Party Agent (CCIL, NSE) handles collateral selection, settlement, and management between borrower and lender.
LTRO & TLTRO	LTRO (Feb 2020): RBI conducts 1-yr/3-yr term repos at policy repo rate to assure durable liquidity to banks. TLTRO (Mar 2020, COVID response): Targeted variant — banks must deploy funds in investment-grade corporate bonds/NBFC debt (min 50% from primary market) to support the corporate bond market.
ADR vs GDR	ADR: Depository receipt issued by a US bank, denominated in USD, listed on NYSE/NASDAQ, representing shares of a foreign (e.g., Indian) company. GDR: Similar instrument listed on European exchanges (e.g., London), can be denominated in USD/Euro. Both bypass direct foreign-market investment barriers for investors.
FEMA 1999 & FEDAI	FEMA 1999 replaced FERA 1973 (effective June 2000), post Tarapore Committee (1997) on Capital Account Convertibility; shifted focus from "regulation" to "management" of forex. FEDAI (est. 1958): Self-Regulatory Organisation of banks authorised to deal in forex; sets rules/charges, trains personnel, accredits forex brokers.
LIBOR to ARR Transition	LIBOR phased out by 31 Dec 2021 after rate-rigging scandal; replaced by Alternate Reference Rates — SOFR (US), SONIA (UK), €STR (EU), SARON (Switzerland), TONAR (Japan).
Merchant Banker Categories (SEBI)	Category I: Full issue management (Lead Manager) — prospectus, underwriting, advisory. Category II: Advisor/co-manager/underwriter only. Category III: Underwriter/advisor only. Category IV: Advisor/consultant only. Min net worth for Category I Merchant Banker: ₹5 crore.

📕 Economic Survey 2020-21 — FPI Flows & Market Capitalisation (Pandemic-Year Recovery)

2021

Net FPI inflows hit an all-time monthly high of $9.8 billion in November 2020; India was the only emerging market to receive equity FII inflows in 2020.
India's market-capitalisation-to-GDP ratio crossed 100% for the first time since October 2010.
Forex reserves reached a level covering 18 months of imports (Dec 2020).

1. MONEY MARKET & SHORT-TERM INSTRUMENTS

Structure & Terms of Money Market

Cue Words	Notes
Money Market Overview	Deals in short-term financial assets with maturity up to 1 year, catering to working capital and cash-flow requirements. Regulator: Reserve Bank of India (RBI).
Call Money	Inter-bank borrowing/lending for 1 day. Interest rate (Call Money Rate) fluctuates dynamically based on supply-demand.
Notice Money	Inter-bank borrowing/lending for 2 to 14 days.
Term Money	Inter-bank borrowing/lending for 15 days to 1 year.
Yield to Maturity & Coupon Rate	Yield to Maturity (YTM): Expected total rate of return on a bond/security if held until maturity. Coupon Rate: Fixed interest rate stated on a bond/security at the time of issuance.

Key Money Market Instruments

Cue Words	Notes
Treasury Bills (T-Bills)	Issued by RBI on behalf of Central Government to meet short-term revenue-expenditure mismatches. State Governments cannot issue T-Bills. Discounted Securities: Issued at a discount to face value and redeemed at par (face value). 3 Maturities: 91-day, 182-day, 364-day. Minimum denomination: ₹25,000. Eligible for banks to maintain Statutory Liquidity Ratio (SLR) and as collateral under Repo.
Cash Management Bills (CMBs)	Short-term discounted security introduced in 2010 to meet temporary cash flow mismatches of Central Govt. Key difference from T-Bills: Tenure is less than 91 days. Eligible for SLR.
Ways and Means Advances (WMAs)	Temporary overdraft/loan facility provided by RBI to Central and State Governments under Section 17(5) of RBI Act 1934 (replaced ad hoc T-Bills in 1997). Tenure: Max 10 consecutive working days (Centre) and 14 working days (States). Charged at Repo Rate (normal WMA) or Repo + 2% (Overdraft).
Certificates of Deposit (CDs)	Negotiable short-term money market instrument issued by Scheduled Commercial Banks and select FIs to raise short-term deposits. Tenure: 7 days to 1 year. Minimum denomination: ₹1 Lakh. Restrictions: Cannot be issued by RRBs or Co-operative Banks. Banks cannot provide loans against CDs.
Commercial Paper (CP)	Unsecured short-term promissory note introduced in 1990, privately placed by highly-rated corporates, Primary Dealers, and FIs. Tenure: 7 days to 1 year. Minimum denomination: ₹5 Lakh. Requires mandatory credit rating.
Commercial Bills (CBs)	Short-term negotiable trade bills drawn by sellers/buyers of goods accepted by commercial banks (max period 90 days). Discounted by commercial banks and rediscounted by RBI.
Market Stabilisation Scheme (MSS)	Introduced March 2004 to sterilise enduring/long-term surplus liquidity (e.g., from large FII capital inflows) separately from day-to-day liquidity management (unlike LAF/repo). Government issues additional T-Bills/dated securities (over and above normal borrowing) under MSS; proceeds held in a separate MSS account, not used for government expenditure. Used post-demonetisation (2016) to absorb the surge in banking-system deposits.

2. CAPITAL MARKET, BONDS & DEBENTURES

Primary vs Secondary Capital Market

Cue Words	Notes
Capital Market Overview	Facilitates medium to long-term funding (> 1 year) for businesses and governments via debt and equity. Regulated by SEBI.
Primary Market (New Issue Market)	Venue where securities are created and issued for the first time by companies via Initial Public Offer (IPO) or Follow-on Public Offer (FPO).
ASBA Mechanism	Application Supported by Blocked Amount: Initiated by SEBI in 2008 via Self-Certified Syndicate Banks (SCSBs) to block application money in investor accounts until allotment.
Secondary Market & Depositories	Venue where existing shares/bonds are traded among investors on stock exchanges (BSE, NSE). Depositories (NSDL & CDSL): Established under Depository Act 1996 to hold securities electronically in Demat Accounts via Depository Participants (DPs).

Shares, Debentures & Specialized Bond Instruments

Cue Words	Notes
Equity vs Preference Shares	Equity Shares: Represent real ownership, confer voting rights in AGMs, and yield variable dividends based on company profit/loss. Preference Shares: Earn fixed dividends, have preferential right over equity in liquidation, but carry no voting rights.
Debentures	Unsecured debt instruments issued by companies carrying a fixed interest rate. Interest is paid out of gross profit before taxes. Types: Convertible vs Non-Convertible (NCDs); Redeemable vs Irredeemable. Carry no voting rights.
Zero Coupon Bonds	Issued at a deep discount and redeemed at face value upon maturity; pay no periodic coupon interest.
Inflation Indexed Bonds (IIBs)	Protect both principal and coupon payments against CPI inflation. Issued as G-Secs, eligible for SLR.
Municipal Bonds	Fixed-income debt issued by Urban Local Bodies (ULBs) for civic infrastructure. First ULB: Bangalore (1997); First public issue: Ahmedabad (1998). Types: General Obligation Bonds (water, sanitation) vs Revenue Bonds (toll roads). FPIs permitted by RBI in 2019.
Masala Bonds	Rupee-denominated bonds issued overseas by Indian entities (corporates, REITs, InvITs, banks for AT1 capital). Foreign exchange risk is borne by the international buyer, protecting Indian issuers from rupee devaluation losses. First issued by IFC in 2014 (₹1,000 cr). Min maturity 3 yrs (≤\50M) / 5 yrs (>\50M). Issued only in FATF/IOSCO member jurisdictions.
Sovereign Gold Bonds (SGB)	RBI-issued digital substitute for physical gold. 8-yr tenure (exit after 5 yrs), pays 2.5% p.a. interest. Interest taxable, capital gains exempt at redemption. Min 1g, Max 4kg/yr limit. Eligible as loan collateral.
Sovereign Blue Bond	World's first launched by Republic of Seychelles (World Bank supported) for marine conservation and sustainable fisheries.
Green/GSS+ Bonds — Latest Data	India's cumulative Green, Social, Sustainability & Sustainability-linked (GSS+) debt hit $55.9 billion by Dec 2024 — up 186% since 2021; green bonds are 83% of this. Green bond investment crossed $45 billion in 2025; India targets $100 billion sustainable finance by 2030. Private sector contributed 84% of total green bond issuance. SEBI-regulated social bonds channel funds into climate action, education, and healthcare.

3. MUTUAL FUNDS, DERIVATIVES & ALTERNATIVE INVESTMENT VEHICLES

Mutual Funds & Investment Vehicles

Cue Words	Notes
Mutual Funds & NAV	Pooled investments managed by professional Asset Management Companies (AMCs). Investors hold 'units' measured by Net Asset Value (NAV).
ELSS (Equity Linked Savings Scheme)	Tax-saving mutual fund offering tax deduction up to ₹1.5 Lakh under Sec 80C with a mandatory 3-year lock-in period (shortest among 80C options).
Total Expense Ratio (TER)	Annual operational costs charged by AMCs to unit holders, capped strictly by SEBI.
Exchange Traded Funds (ETFs)	Passively managed baskets of securities traded on stock exchanges throughout the day like stocks (lower expense ratio than MFs). Examples: CPSE ETF (11 CPSEs), Bharat-22 ETF (16 CPSEs + 3 PSBs + 3 private firms), Debt ETFs, Gold ETFs.
REITs (Real Estate Investment Trusts)	Pools investor funds to invest in income-generating commercial real estate; rental income distributed to unit holders. Embassy-Blackstone launched 1st Indian REIT.
InvITs (Infrastructure Investment Trusts)	Pools funds for long-term infrastructure assets (highways, power transmission lines).
National Investment & Infrastructure Fund (NIIF)	India's 1st Sovereign Wealth Fund (SWF) created by GOI to catalyze infrastructure investment.
ESG Funds	Mutual funds screening investments based on Environmental, Social, and Governance criteria alongside financial performance.

Derivatives & Hedging Instruments

Cue Words	Notes
Derivatives Overview	Financial contracts deriving value from underlying assets (stocks, bonds, currencies, commodities). Regulated by SEBI.
Forwards	Unregulated, customized OTC (Over-The-Counter) contracts between two parties to buy/sell assets at a future date.
Futures	Standardized, exchange-traded regulated contracts with mandatory fulfillment at specified future price and date.
Options (Call & Put)	Contract giving the buyer the right but not obligation to buy (Call Option) or sell (Put Option) an asset at a specified strike price.
Swaps	Custom OTC contracts to exchange future cash flows (e.g. interest rate or currency swaps).

4. MARKET REGULATION, PRIMARY DEALERS & STOCK EXCHANGE TERMS

Cue Words	Notes
SEBI — Functions	Three-fold mandate: Protective (curb malpractices, insider trading), Regulatory (registration of intermediaries, listing rules), and Developmental (investor education, market infrastructure).
SEBI & Capital Market Reforms	Introduced Demat trading, ASBA, T+1 settlement cycle, mandatory credit rating disclosures, and tighter insider-trading/related-party-transaction norms over the years. 2025-26 reform push (under Pandey): SWAGAT-FI framework for single-window, simplified foreign-investor access; a consolidated 'India Market Access' portal; corporate bond market-making framework with RBI/MoF (dedicated bond ETFs, index derivatives, debt-broker classification); and streamlined IPO/pre-IPO share-pledge norms.
Forward Markets Commission (FMC)	Erstwhile regulator of commodity derivatives markets (under Ministry of Finance). Merged into SEBI in 2015, bringing commodity and securities market regulation under a single regulator.
Primary Dealers (PDs)	Specialised financial institutions authorised by RBI to underwrite and market-make in Government Securities (G-Secs), supporting primary auctions and secondary-market liquidity.
Circuit Breaker	Exchange-imposed trading halt (at index or stock level) triggered by sharp price swings within a session, to curb panic-driven volatility.
Bull vs Bear Market	Bull Market: Sustained rise in prices/investor optimism. Bear Market: Sustained fall in prices/pessimism, generally defined as a ≥20% decline from recent highs.
Market Capitalisation	Share Price × Total Outstanding Shares of a company; used to classify firms as large-cap, mid-cap, or small-cap.
Gold ETF vs Sovereign Gold Bond (SGB)	Gold ETF: Tracks physical gold price, traded like a stock, no fixed interest, can be sold anytime on exchange. SGB: Sovereign-backed, pays 2.5% p.a. interest, capital gains tax-exempt at maturity, but less liquid (fixed 8-year tenor).

5. DERIVATIVES — ADVANCED CONCEPTS, FACTORING & FORFAITING

Cue Words	Notes
Derivative — Legal Definition (SCRA 1956)	Sec 2(ac), Securities Contracts (Regulation) Act, 1956: a security derived from a debt instrument, share, or loan (secured/unsecured), or a contract for differences, or a contract deriving value from prices/index of prices of underlying securities. India's derivatives trading commenced June 2000 on the recommendation of the L.C. Gupta Committee; SEBI granted final approval in May 2001.
Forward Rate Agreement (FRA)	OTC contract to fix an interest rate today for a notional loan/deposit starting at a future date; notional principal only, no actual lending. Notation: a 3×6 FRA = protection for a 3-month borrowing starting 3 months from now and ending 6 months from now.
Option Terminology	Premium: price paid by buyer to seller for the right. Strike/Exercise Price: pre-fixed price for exercise. American Option: exercisable anytime up to expiry. European Option: exercisable only on expiry date. Open Interest: total outstanding options contracts in the market at a point in time.
Credit Default Swap (CDS)	Derivative allowing a lender/investor to transfer credit (default) risk of a borrower to a CDS seller, in exchange for periodic premium payments — effectively insurance against non-payment; risk is shifted, not eliminated. RBI issued draft CDS guidelines (Feb 2021) to develop the corporate bond market, especially for lower-rated issuers; retail users may use CDS only for hedging, non-retail users (insurers, pension/mutual funds, AIFs, FPIs) for hedging and other purposes. 2008 GFC linked to CDS-seller defaults (Lehman Brothers, Bear Stearns, AIG).
ISDA Master Agreement	Standard documentation framework (International Swaps and Derivatives Association, developed from the 1985 Swaps Code) used globally to document OTC derivatives, reducing legal/documentation risk between counterparties.
Factoring	Financing arrangement where a "factor" buys a firm's receivables/invoices and takes over collection; regulated in India by the Factoring Regulation Act, 2011. "Without recourse" factoring is not permitted in India. Types: Recourse vs Non-recourse; Domestic vs International (two-factor, single-factor, direct export/import factor systems). Max credit period ~150 days (incl. 60-day grace).
Forfaiting	Discounting of medium/long-term (1–5 yr) international trade receivables (bills of exchange/promissory notes) on a without-recourse basis, up to 100% of invoice value; "forfait" = French for surrender of rights. In India, Exim Bank and AD Category-I banks handle forfaiting (non-recourse basis only). Minimum transaction size ~USD 250,000.
TReDS (Trade Receivables Discounting System)	RBI mechanism (introduced 2014) for financing MSME trade receivables from corporate/government buyers via multiple financiers on a digital, without-recourse platform; enables both factoring and reverse factoring. Minimum paid-up equity capital for a TReDS entity: ₹25 crore; no single non-promoter entity may hold >10% equity.

6. VENTURE CAPITAL, LEASE FINANCE & HIRE PURCHASE

Cue Words	Notes
Venture Capital — Definition & Evolution	Long-term, high-risk/high-return equity (plus conditional/convertible loans) investment in start-ups with growth potential; Bhatt Committee (1972) first recommended VC in India. First VC fund: IFCI's Risk Capital Foundation (1975). Regulated by SEBI under SEBI (Alternative Investment Funds) Regulations — VCF is a category of AIF investing in unlisted start-up/early-stage securities.
Stages of VC Financing	Early-stage: Seed capital → Start-up → Second-round financing. Later-stage: Expansion finance, Replacement finance, Turnaround financing, Buyout deals. Exit routes: IPO, buy-back by promoters, sale to another company/new VC, self-liquidation (debt), or winding up.
VC Fund — SEBI Thresholds	Minimum investment accepted from an investor: ₹5 lakh. Minimum firm commitment per scheme before commencing operations: ₹5 crore.
Finance Lease vs Operating Lease	Finance Lease: covers most of the asset's economic life, non-cancellable, lessee bears maintenance/obsolescence risk, often has purchase option. Operating Lease: short period vs asset life, cancellable, lessor bears maintenance/obsolescence risk, no purchase option (e.g., aircraft, IT equipment). Other types: Sale-and-leaseback, Leveraged lease, Cross-border lease.
Leasing — Off-Balance-Sheet Effect	Lease rentals are a P&L expense; the leased asset/liability does not appear on the lessee's balance sheet, keeping debt-equity ratio unaffected (unlike asset purchase via borrowing). First Indian leasing company: First Leasing Company of India Ltd (1973). Governed by Indian Contract Act (bailment), Transfer of Property Act, and Ind AS 19.
Hire Purchase	Instalment credit where ownership passes to the hirer only after the last instalment is paid (unlike lease, where lessor retains ownership). Governed by Hire Purchase Act, 1972. Hirer (not owner) can claim depreciation, unlike in a lease where the lessor claims depreciation.

7. CREDIT RATING AND CREDIT SCORING

Cue Words	Notes
Credit Rating vs Credit Scoring	Credit Rating: CRA's opinion on an issuer's (corporate/sovereign) capacity to meet debt obligations, expressed in symbols (AAA...D); guidance, not a recommendation to invest. Credit Scoring: statistical assessment of an individual's creditworthiness by a Credit Information Company (CIC), expressed as a 3-digit score (300–900).
History & SEBI-Registered CRAs	Modern rating traces to John Moody (1909, US railroad bonds). In India, CRISIL (est. 1987) was the first CRA. 7 SEBI-registered CRAs: CRISIL, ICRA, CARE Ratings, India Ratings (Ind-Ra, ex-Fitch India), Brickwork Ratings, Infomerics, Acuité Ratings. Tie-ups: CRISIL–S&P, ICRA–Moody's, CARE–Fitch. Regulated under SEBI (Credit Rating Agencies) Regulations, 1999; minimum CRA net worth ₹5 crore.
Rating Symbols & Grades	Investment grade: AAA (highest safety) > AA > A > BBB. Speculative/non-investment grade: BB > B > C > D (default). +/- suffixes fine-tune within a grade. Rating Outlook: Stable / Positive / Negative / No Outlook — indicates likely direction of rating movement over 6 months–2 years, not a guarantee of change.
Credit Information Companies (CICs) in India	Governed by Credit Information Companies (Regulation) Act, 2005; licensed by RBI. Four CICs: TransUnion CIBIL (first, 2000; score range 300–900), Experian, Equifax, CRIF High Mark. Every Credit Institution must be a member of all CICs (post Aditya Puri Committee, 2014) — earlier only one CIC was mandatory.

8. MUTUAL FUND SCHEME CLASSIFICATION (SEBI 2017 CATEGORISATION)

Cue Words	Notes
SEBI's Five Broad Categories	Equity Schemes (Large/Mid/Small/Multi Cap, ELSS, Sectoral/Thematic, Focused, Value/Contra, Dividend Yield); Debt Schemes (by Macaulay duration — Overnight, Liquid, Ultra-Short, Low, Money Market, Short/Medium/Long Duration, Gilt, Corporate Bond, Credit Risk); Hybrid Schemes; Solution-Oriented Schemes (Retirement, Children's Fund); Other Schemes (Index Funds/ETFs, Fund of Funds).
Key Equity Fund Thresholds	Large Cap Fund: ≥80% in large-cap equity. Multi Cap Fund: ≥65% across market caps. Large & Mid Cap: ≥35% each in large- and mid-cap. Focused Fund: max 30 stocks. ELSS: ≥80% in equity, statutory 3-year lock-in, tax benefit under Sec 80C.
Hybrid Fund Thresholds	Conservative Hybrid: 10–25% equity, 75–90% debt. Balanced Hybrid: 40–60% each (no arbitrage). Aggressive Hybrid: 65–80% equity, 20–35% debt. Multi Asset Allocation: ≥10% each in at least 3 asset classes. Arbitrage Fund: ≥65% equity via arbitrage strategy.
Organisational Structure of Funds	Open-ended: continuous subscription/repurchase at NAV, no fixed maturity. Close-ended: fixed maturity (e.g., 3–5 yrs), subscription only at NFO, exit via stock-exchange listing or periodic repurchase. Interval Funds: hybrid — repurchase only during specified windows (min. 2-day window, 15-day gap between windows).
Mutual Fund Governance	Structured as a trust with Sponsor → Trustees → AMC → Custodian. At least two-thirds of trustee-company/board directors, and 50% of AMC directors, must be independent. Evolution: UTI (1963) Phase I → Public-sector MFs (SBI MF 1987) Phase II → Private sector entry (Kothari Pioneer, 1993) Phase III → UTI bifurcation (2003) Phase IV.

9. INSURANCE PRODUCTS, PENSION PRODUCTS & PARA BANKING

Cue Words	Notes
Bancassurance	Selling insurance products through banks; originated in France (1980s); permitted in India from August 2000 under Section 6(1)(o) of the Banking Regulation Act, 1949, with RBI approval. Models: corporate agency/distribution alliance (used in India) and JV model (used in India); merger and build-own-insurer models not adopted in India.
Insurance Ombudsman Scheme	Redresses policyholder grievances (delay/repudiation of claims, premium disputes, mis-selling) up to an award of ₹30 lakh; governed by Insurance Ombudsman Rules, 2017; institution functioning since 1999; no fee to complainant.
Insurance Annuities	Immediate Annuity: single premium, payments start at once. Deferred Annuity: payments start at a specified future date/age; can be funded by single or regular payments.
Life Insurance Product Types	Term Insurance: pure risk cover, no maturity payout, lowest premium; suited to high-cover/low-income needs. Whole Life Policy: covers insured's entire life; face amount paid on death whenever it occurs. Endowment Policy: pays sum assured on death during the term, or on survival to maturity — combines protection + savings. Money-Back Plan: periodic survival benefits paid as a % of sum assured during the term, balance paid at maturity; full sum assured remains covered throughout. With-Profit vs Without-Profit: With-Profit (participating) policyholders share insurer's surplus via bonus, hence higher premium; Without-Profit (non-participating) has no surplus share, lower premium. ULIP (Unit Linked Insurance Plan): combines insurance + market-linked investment; premium split between cover and units, regulated jointly under IRDAI/SEBI norms.
PMSBY (Accident Insurance)	Age 18–70; ₹2 lakh cover for accidental death/full disability, ₹1 lakh for partial disability; premium ₹20 p.a. via auto-debit; annual renewal (1 June–31 May).
EPFO & EPF/EPS Contributions	EPFO (est. 1952) runs 3 schemes: EPF, EPS (Employees' Pension Scheme), EDLIS (Deposit Linked Insurance). Employee contributes 12% of salary to EPF; employer's 12% splits into 3.67% (EPF) + 8.33% (EPS, capped at wage ceiling). UAN (Universal Account Number, 2014) links multiple EPF member-IDs to one employee. EPF taxation: EEE (Exempt-Exempt-Exempt) if held ≥5 years.
Public Provident Fund (PPF)	15-year lock-in (extendable in 5-year blocks); annual investment ₹500 (min) to ₹1.5 lakh (max), Sec 80C deduction; interest and maturity proceeds fully tax-exempt; loan facility available between 3rd–5th year.
NPS — Tier I vs Tier II	Regulated by PFRDA (PFRDA Act, 2013); NSDL is Central Recordkeeping Agency (CRA); subscriber gets a PRAN (Permanent Retirement Account Number). Tier I: mandatory, non-withdrawable pension account. Tier II: voluntary, freely withdrawable savings account (requires an active Tier I). Normal exit (age 60): max 60% lump sum (tax-exempt) + min 40% must buy an annuity. If corpus ≤ ₹5 lakh, full withdrawal as lump sum allowed. Tax deduction: Sec 80CCD(1) within 80C's ₹1.5 lakh ceiling, plus extra ₹50,000 under 80CCD(1B).
Atal Pension Yojana (APY)	For unorganised-sector workers, age 18–40; guaranteed monthly pension of ₹1,000/2,000/3,000/4,000/5,000 from age 60, based on contribution/entry age; Govt co-contribution (2015–2020 cohort only). Income-tax payers barred from joining post 1 Oct 2022.
Para-Banking Activities of Banks	Non-core financial activities banks may undertake departmentally or via subsidiary (RBI Master Directions, 2016): equipment leasing/hire-purchase, factoring, primary dealership, underwriting, mutual fund/insurance/pension-fund business, portfolio management, G-Sec retailing, stock/commodity broking membership, VC fund investment. Equity investment cap in a single subsidiary/financial-services company: 10% of bank's paid-up capital & reserves; aggregate cap across all such investments: 20%.

10. MICRO FINANCE INSTITUTIONS (MFIs) & SHG-BANK LINKAGE

Cue Words	Notes
Microfinance — Evolution (3 Phases)	Phase 1 (pre-Independence): RBI's Agriculture Credit Department; cooperative strengthening. Phase 2 (late 1960s): Lead Bank Scheme (RBI, Dec 1969); bank nationalisation (14 banks, 1969); RRBs (1975); NABARD (1982); first SHGs emerge via NGOs like MYRADA (linked SHGs to banks from 1984-85). Phase 3 (modern movement): SHG-Bank Linkage Programme launched by NABARD in 1992 (pilot: 500 SHGs); RBI made SHG financing a mainstream Priority Sector activity in 1996.
Grameen Bank Model	Pioneered by Prof. Muhammad Yunus (Nobel Prize 2006); established 1983 in Jobra village, Bangladesh. Group of 5 members; loans given on trust, no collateral/documentation; individual repayment liability.
Self Help Groups (SHGs)	Informal group of 10-20 individuals (min 5 in hilly/tribal/dispersed areas), homogenous socio-economically, promoting savings + credit. Up to 20% (exceptionally 30%) members can be Above Poverty Line. Loan-to-savings ratio: 1:1 to 1:4 (relaxable for matured SHGs). No collateral required (RBI/NABARD mandate). 100% refinanced by NABARD.
Joint Liability Groups (JLGs)	Group of 4-10 members of same village/socio-economic background, formed to avail bank loans without collateral — used when SHG members need larger loans than group can mutually guarantee.
MFI Legal Categories (NABARD Classification)	Not-for-profit MFIs: Societies (Societies Registration Act 1860), Trusts (Indian Trust Act 1882), Sec 8 companies. Mutual benefit MFIs: State/National Cooperatives, Mutually Aided Cooperative Societies (AP Act 1955). For-profit MFIs (NBFC-MFI): RBI-regulated NBFCs — largest category, most microfinance flows through these.
RBI Micro Finance Loans Directions 2022	Micro finance loan = collateral-free loan to household with annual income ≤ ₹3 lakh. Cannot be linked to a lien on borrower's deposit account. Qualifying assets: NBFC-MFIs must hold ≥75% of assets as microfinance loans; non-MFI NBFCs capped at 25%. Repayment cap: Household loan-repayment outflow capped at 50% of monthly household income (all loans combined). No pre-payment penalty; only 3 loan-pricing components allowed — interest, processing charge, insurance premium.
Malegam Committee (2011)	Constituted after the 2010 Andhra Pradesh MFI crisis (over-lending, coercive recovery, borrower suicides). Recommended: separate NBFC-MFI category, margin cap/interest ceiling, transparency in pricing, grievance redressal, and curbs on multiple lending.

11. INSURANCE COMPANIES & REGULATORY FRAMEWORK

Cue Words	Notes
Historical Milestones	1818: Oriental Life Insurance Co. (first life insurer, Calcutta). 1912: Indian Life Assurance Companies Act (first statutory regulation). 1938: Insurance Act (consolidating legislation). 1956: Life insurance nationalised → LIC formed (absorbed 245 insurers/societies). 1972: GIBNA nationalised general insurance (4 subsidiaries under GIC — National, New India, Oriental, United India). 1993: Malhotra Committee (Chair: R.N. Malhotra, ex-RBI Governor) recommended reopening to private/foreign players. 1999: IRDA Act passed; IRDA constituted April 2000.
FDI in Insurance — Progression	26% (2000) → 49% (2015) → 74% (Budget 2021-22). 100% FDI allowed in insurance intermediaries (IRDAI notification, Sept 2019).
Union Budget 2021-22 — FDI in Insurance Raised to 74% (Origin Milestone)	2021 Budget 2021-22 (presented 1 Feb 2021) proposed increasing the permissible FDI limit in the insurance sector from 49% to 74%, allowing foreign ownership and control with safeguards — the intermediate historical step between the 2015 hike (26%→49%) and the eventual 100% FDI move enacted via the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (see the row below).
Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025	2025 Passed by Parliament on 17 December 2025; amends 3 Acts — the Insurance Act 1938, LIC Act 1956, and IRDAI Act 1999. Key reform: allows up to 100% FDI in insurance companies (up from the prior cap). Other provisions: one-time licensing for intermediaries (replacing repeated renewals) plus suspension (rather than outright cancellation) as a penalty option; prior-regulatory-approval threshold for insurer share-capital transfers raised from 1% to 5%; Net Owned Fund requirement for Foreign Reinsurance Branches reduced from ₹5,000 crore to ₹1,000 crore. LIC given autonomy to open Zonal offices domestically and align foreign offices with local jurisdiction laws; new Policyholders' Education and Protection Fund created; policyholder data protection aligned with the DPDP Act 2023. IRDAI empowered to disgorge wrongful gains from insurers/intermediaries; penalty framework rationalized with defined imposition factors.
Insurance Penetration & Density (India, 2019)	Penetration (premium/GDP): 3.76% (2019); life 2.82%, non-life 0.94%. Density (premium/capita, USD): $78 (2019); life $58, non-life $19. India's share of life insurance premium in total business (74.94%) is far higher than the global average (46.34%), reflecting under-developed non-life insurance. 2025 GST 2.0 (56th GST Council, 3 Sep 2025): GST exempted entirely on all individual life insurance (term, ULIP, endowment) and individual health insurance policies (incl. family floater & senior citizen), plus their reinsurance — aimed at boosting affordability and coverage. Full detail in the Taxation & Public Finance notes (GST 2.0 section).
IRDAI Powers & Functions	Issues/renews/cancels Certificate of Registration; protects policyholder interests (claims, surrender value, nomination); regulates investment of insurer funds and solvency margin; supervises Tariff Advisory Committee (TAC); sets rural/social sector obligations for insurers.
Insurance Intermediaries — Agent vs Broker	Agent (Individual/Corporate): Represents only one insurer per line (life/general/health). Broker: Can represent multiple insurers; advises customers on product/company choice without charging them. Both licensed by IRDAI.
Reinsurance & GIC Re	GIC Re: Sole national reinsurer; statutory cession from every general insurer mandated under Sec 101A of Insurance Act 1938 — currently 5% (was 20% till 2006-07, stepped down via 15%→10%→5%). Market now has ~11 reinsurers (GIC Re + private/foreign reinsurer branches + Lloyd's India).
Insurance Repository & e-Insurance Account (e-IA)	Insurance Repository system launched 16 Sept 2013 by IRDA — converts policies to electronic form; repositories cannot sell policies, only maintain/service them (free of cost). 5 licensed repositories: NSDL, Central Insurance Repository, SHCIL Projects, Karvy, CAMS. One e-IA per individual permitted.

12. FINANCIAL SYSTEM REGULATORS — SEBI, IRDAI, PFRDA FUNCTIONS

Cue Words	Notes
SEBI — Statutory Basis & 3-Fold Role	Set up under SEBI Act 1992 (statutory powers from 30 Jan 1992); functions under Ministry of Finance. Replaced the Controller of Capital Issues and Company Law Board's earlier control functions. Protective: curbs fraud/insider trading. Regulatory: registers/regulates all market intermediaries (merchant bankers, brokers, depositories, CRAs, mutual funds, FPIs). Developmental: investor education, promoting self-regulatory organisations.
SEBI — Quasi-Judicial Powers	Can suspend trading of a security, restrain persons from the securities market, attach bank accounts (with Judicial Magistrate approval, max 1 month), impound proceeds under investigation, and pass Cease and Desist orders. Holds civil-court-equivalent powers under CPC 1908 (summon witnesses, inspect books, examine on oath).
PFRDA — Establishment & NPS	Established 2003; regulates National Pension System (launched 2003 for govt employees, opened to all citizens 2009). Comes under Ministry of Finance.
PFRDA Intermediaries	CRA (Central Recordkeeping Agency): Issues PRAN, maintains subscriber records, operational bridge between PFRDA and other intermediaries. PFMs (Pension Fund Managers): Invest/manage subscriber contributions per PFRDA norms. PoPs (Points of Presence), Trustee Bank, Custodian: Complete the NPS intermediary architecture.
NBFC Exemptions from RBI Registration	Entities regulated by other bodies don't need separate RBI registration: SEBI-registered VC funds/merchant bankers/stock brokers; IRDAI-registered insurers; Nidhi companies (MCA); Chit funds (State Govts); Housing finance companies (NHB).

13. DEBT MARKET, G-SECS & PRIMARY DEALERS

Cue Words	Notes
Government Securities (G-Secs) — Basics	Sovereign, credit-risk-free coupon-bearing instruments issued by RBI on behalf of GOI; par value ₹100, coupon paid half-yearly; tenures from <1 year (T-Bills) to 40+ years. Issued via auctions (Multiple Price or Uniform Price method) on RBI's E-Kuber platform; secondary market trades on NDS-OM, settled via CCIL.
State Development Loans (SDLs)	Securities issued by State Governments (via RBI auction) to finance state expenditures; pay half-yearly coupon interest, traded alongside G-Secs/T-Bills on NDS-OM.
Bond Valuation — 4 Theorems	Bond price is inversely related to interest-rate changes. Price rise (rate falls) > price fall (rate rises) for equal rate changes. Longer maturity → higher price sensitivity. Between equal-maturity bonds, the lower-coupon bond is more price-sensitive.
Primary Dealers (PDs)	Introduced by RBI in 1995; RBI-registered entities (bank subsidiaries, AIFI subsidiaries, or NBFC-registered companies) that commit to bidding in G-Sec auctions, underwrite issues, and provide firm buy-sell quotes — creating a liquid secondary market for government paper.
Retail Direct Scheme (RDS) & FIMMDA	RBI Retail Direct (2021): Lets individuals open a Gilt Securities Account directly with RBI to invest in G-Secs/T-Bills/SDLs/SGBs. FIMMDA: Self-regulatory body for fixed income, money market, and derivatives dealers — standardises documentation and market practices.
Corporate Bond Market — SEBI Norms	Debt securities with maturity >365 days issued privately by listed companies must comply with SEBI listing norms; must carry a registered CRA credit rating and be issued/traded in demat form.

14. FOREIGN EXCHANGE MARKET STRUCTURE, FEMA & DEPOSITORY RECEIPTS

Cue Words	Notes
Forex Market — Evolution in India	1978: RBI allowed banks intraday forex trading. 1991: Two-step rupee devaluation. 1992: LERMS (dual exchange rate, Rangarajan Committee) → unified market rate from March 1993. Aug 1994: Current Account Convertibility (IMF Article VIII accepted). Sodhani Committee (1994): Landmark recommendations to widen/deepen the forex market, giving banks greater operational freedom.
FEMA 1999	Replaced FERA 1973 (effective 1 June 2000), post-Tarapore Committee (1997) on Capital Account Convertibility. Shifted approach from "regulation" to "management" of forex; 7 chapters, 49 sections. Enforced by RBI's Forex Dept. and Directorate of Enforcement (Ministry of Finance).
FEDAI	Foreign Exchange Dealers' Association of India (est. 1958): SRO of banks authorised to deal in forex; issues rules/charges, trains staff, accredits forex brokers, and collaborates with FBIL/FIMMDA/IBA on rupee interest-rate benchmarks.
LIBOR → Alternate Reference Rates (ARRs)	LIBOR discontinued 31 Dec 2021 after rate-manipulation scandal. Replacements: SOFR (US, secured), SONIA (UK), €STR (EU), SARON (Switzerland, secured), TONAR (Japan) — all overnight, transaction-based rates. India's LIBOR-linked exposure: ECBs/FCCBs (~$50 bn) and derivatives (~$281 bn) required transition to ARRs/MIFOR-equivalent domestic benchmarks.
ADR vs GDR	ADR: Issued by a US depository bank, USD-denominated, listed on NYSE/NASDAQ, represents shares of a foreign company (e.g., Indian firm). First used in USA since the 1920s. GDR: Similar instrument listed on European exchanges (e.g., London); can be denominated in USD, Euro, or another currency. Both let foreign investors gain exposure while trading domestically (own settlement/currency conventions).
FX-Retail Platform	RBI platform giving resident individuals/small firms direct electronic access to the interbank forex market for buying/selling USD-INR, deepening retail forex participation.

15. MERCHANT BANKING SERVICES

Cue Words	Notes
Merchant Banker Categories (SEBI)	Category I: Full issue management (Lead Manager) — advisor, consultant, underwriter, portfolio manager. Category II: Advisor/co-manager/underwriter/portfolio manager only. Category III: Underwriter/advisor/consultant only. Category IV: Advisor/consultant only. Min net worth for Category I: ₹5 crore.
Merchant Banking Licences Needed	Separate SEBI Certificates of Registration required for: Merchant Banker, Banker to the Issue, Debenture Trustee (cannot be the Merchant Bank itself — must be a subsidiary), and Portfolio Manager (SEBI Portfolio Manager Regulations 1993).
Underwriting Obligation Norms	Lead Category-I Merchant Banker must underwrite a minimum of 5% of total commitment or ₹25 lakh, whichever is less; under SEBI ICDR Chapter XA issues, merchant bankers (jointly) must underwrite at least 15% of issue size.
Monitoring Agency	Mandatory for public issues exceeding ₹500 crore — a Financial Institution monitors utilisation of issue proceeds and reports to SEBI half-yearly on project implementation and fund deployment.
Other Merchant Banking Activities	Issue Management (pre/post-issue functions, DRHP/RHP drafting), Corporate Counselling & Advisory (capital structure, M&A), Project Counselling (DPR, project appraisal), Loan Syndication (Project Information Memorandum), NRI Advisory Services.

16. FINANCIAL INSTITUTIONS (AIFIs/SFIs/SLFIs), DFHI & FINANCIAL SAFETY-NET BODIES

Cue Words	Notes
All India Financial Institutions (AIFIs) — Only 4 Today	GoI currently recognises only 4 AIFIs regulated by RBI: EXIM Bank, NABARD, National Housing Bank (NHB), SIDBI. Older AIFIs (IFCI 1948, ICICI 1955, IDBI 1964, IIBI 1997) were converted into banks — ICICI reverse-merged with ICICI Bank (2000, first such AIDB), IDBI reverse-merged with IDBI Bank (2002). Narasimhan Committee-I (1991) first recommended converting AIFIs into Development Banks.
Specialised Financial Institutions (SFIs)	RCTC (Risk Capital & Technology Finance Corporation, 1988) — later renamed IFCI Venture Capital Funds Ltd (2000); India's first venture-capital-type institution, promoted originally as Risk Capital Foundation (1975) by IFCI. TFCI (Tourism Finance Corporation of India, 1989) — specialised AIFI for tourism-sector financing, set up on Yunus Committee (National Committee on Tourism) recommendation.
State Level Financial Institutions (SLFIs)	SFCs (State Finance Corporations): first set up in Punjab (1955); ~18 SFCs exist today. SIDCs (State Industrial Development Corporations): first set up in Andhra Pradesh and Bihar (1960).
DFHI (Discount and Finance House of India)	Set up April 1988 by RBI jointly with public sector banks and LIC/GIC/UTI, on Vaghul Committee (1987) recommendation (Chore Committee, 1979, first proposed a discount house). Deals in all money market instruments without ceiling; functions as the money market's chief market-maker, evening out systemic liquidity.
DICGC (Deposit Insurance and Credit Guarantee Corporation)	Formed 1978 by merging the Deposit Insurance Corporation (1962) and Credit Guarantee Corporation (1971); a wholly-owned RBI subsidiary insuring bank deposits. Core function post-1990s reforms: Deposit Insurance (averting bank-run panic, ensuring financial stability) rather than credit guarantees.
Union Budget 2021-22 — DICGC Act Amendment Proposal (Origin)	2021 Budget 2021-22 proposed amendments to the DICGC Act 1961 to give depositors easier, time-bound access to their deposits up to the insurance cover limit in the event of bank distress.
Union Budget 2021-22 — Bad Bank (ARC/AMC) Origin Announcement	2021 Budget 2021-22 announced setting up an Asset Reconstruction Company Limited (ARC) and an Asset Management Company (AMC) to consolidate and take over existing stressed debt, then manage and dispose of these assets to Alternate Investment Funds and other buyers — this proposal became India's "Bad Bank", the National Asset Reconstruction Company Ltd (NARCL), incorporated 7 July 2021 (paired with IDRCL for resolution). Full NARCL-IDRCL detail is in the Money & Banking notes.
Union Budget 2021-22 — PSB Recapitalisation	2021 Budget 2021-22 provided ₹20,000 crore for recapitalisation of Public Sector Banks in 2021-22, to further consolidate their financial capacity.
ECGC & NEIA (Export Credit Insurance)	ECGC (Export Credit Guarantee Corporation of India, under Ministry of Commerce & Industry): provides credit-insurance cover to Indian exporters against political/commercial risk in importing countries for medium/long-term exports. NEIA (National Export Insurance Account, set up March 2006): supplements ECGC where it cannot cover a project purely on commercial grounds; corpus-based, exposure up to 10× corpus; project must be commercially viable and strategically important for India.

17. STOCK EXCHANGE INFRASTRUCTURE, MARKET TERMS & PENSION-SECTOR OVERSIGHT BODIES

Cue Words	Notes
OTCEI — India's First Fully Computerised Exchange	Over the Counter Exchange of India Ltd, set up 1989, commenced trading 1992; promoted by UTI, ICICI, SBI Cap to overcome delayed settlement/lack of transparency on older exchanges and to give smaller companies (paid-up capital ₹30 lakh–₹25 crore) stock market access.
SME Exchanges — BSE SME & NSE Emerge	SEBI permitted dedicated SME trading platforms (18 May 2010); BSE SME and NSE Emerge went live 13 March 2012. Listing eligibility: post-issue paid-up capital must not exceed ₹25 crore; relaxations include half-yearly (not quarterly) results and no continuous minimum-shareholder requirement.
NSCC & Demutualisation	NSCC (National Securities Clearing Corporation, 1996): public-sector counterparty-risk guarantor for all NSE trades. Demutualisation (started 2002 by SEBI): separates ownership, management, and trading membership of a stock exchange — no broker can sit on an exchange's Board.
Greenshoe Option	Provision letting a first-time share issuer sell additional shares (usually 15%) to the public over the original offer size — also called the over-allotment option; named after the first company (Green Shoe Co., USA) to use it.
Participatory Notes (PNs) & Indian Depository Receipts (IDRs)	PN: Derivative/Overseas Derivative Instrument issued abroad by a SEBI-registered FII against an underlying Indian security, letting unregistered foreign investors gain economic exposure without direct FII registration; regulated only via SEBI's reporting/KYC mandates on the issuing FII (2004 regs, tightened 2008) — cannot be issued to NRIs. IDR: Mirror instrument — lets Indian investors hold rupee-denominated depository receipts against a foreign company's shares. StanChart (2010) remains India's only IDR issuer, raising ₹2,500 crore.
Securitisation — RBI Minimum Retention Requirement (MRR)	NBFCs must hold securitised assets (auto/home loans converted to marketable securities) for a minimum 6 months before sale, retaining 5–10% of the pool as a continuing stake; MFIs must hold theirs for 3 months.
Capital Terminology & Commodity Exchanges	Authorised Capital (ceiling per MoA/AoA) ≥ Issued Capital (offered to public) ≥ Subscribed Capital (accepted by investors) ≥ Paid-up Capital (actually paid in). 3 national commodity exchanges: MCX (Mumbai), NCDEX (Mumbai), NMCE (Ahmedabad) — regulated by the erstwhile FMC, now merged into SEBI (2015).
FSDC (Financial Stability and Development Council)	Apex body set up December 2010 (in line with G-20 initiatives), chaired by the Finance Minister, comprising heads of all financial-sector regulators plus the Finance Secretary and CEA. Mandate: macro-prudential supervision of large financial conglomerates, inter-regulatory coordination, and financial literacy/inclusion — without diluting individual regulators' autonomy.
NPS Early Variants — Swavalamban & NPS Lite	Swavalamban Scheme (Sept 2010): low-cost NPS variant for the unorganised sector with Government co-contribution per subscriber (extended till 2016-17), superseded functionally by APY (2015). NPS Lite: model specifically designed for economically disadvantaged subscribers via reduced charges; NPS Corporate Sector Model (Dec 2011) let organised-sector employers migrate employees onto NPS.

18. GLOSSARY: MARKET INSTRUMENTS, RISK STATISTICS & FUND STRUCTURES

Cue Words	Notes
Escrow Account	A separate third-party bank account holding funds belonging to transacting parties, released only on fulfilment of agreed contract conditions; widely used in India's PPP infrastructure projects and by RBI-authorised dealer banks for NRI share-acquisition deals. Term derives from French escroue (a scrap of parchment held by a third party till completion).
Mezzanine Financing	A hybrid debt-equity instrument giving the lender rights to convert to an ownership/equity stake; ranks subordinate to senior debt but senior to equity in the creditor hierarchy, with returns higher than debt but lower than equity. Used for SMEs, infrastructure and real estate; ICICI Venture's Mezzanine Fund was India's first dedicated fund.
Hedge Funds	Largely unregulated pooled investment vehicles that take leveraged bets across asset classes using sophisticated strategies, charging a typical "2-and-20" fee (2% management + 20% of profits); accept only wealthy/institutional investors. LTCM's 1998 collapse and Amaranth's 2006 natural-gas losses ($6.5bn) are classic failure case studies; in India, much of the Participatory Notes route is believed to route hedge-fund money.
Junk Bond / Mezzanine Debt	High-risk, high-interest securities issued by a company/bidder to finance a takeover bid; informally called "junk" due to the elevated default risk.
Zero-Coupon Bond	A bond carrying no periodic interest, issued at a discount to face value; investor's return is the difference between issue price and the face value received at maturity.
QIP (Qualified Institutional Placement)	SEBI mechanism (since May 2006) letting BSE/NSE-listed companies raise capital by issuing equity/convertible securities directly to Qualified Institutional Buyers without the elaborate procedural requirements of a public issue; minimum 10% reservation for mutual funds.
Book Building	IPO price-discovery process where a merchant-banker "book runner" collects investor bids within a price band (prospectus omits final price); issue price is fixed post bid-closure based on demand at each price level.
Bellwether Stock & Penny Stocks	Bellwether stock: a share whose price movement is tracked as a proxy for the broader market's direction. Penny stocks: very low-priced, low-market-cap shares of small companies, prone to speculative price spikes (as seen on BSE/NSE in mid-2006).
Standard Deviation & Stochastic Process	Standard Deviation: statistical measure of how far a variable's values deviate from its mean over time — used to gauge investment volatility/risk. Stochastic Process: any process exhibiting random behaviour, e.g., Brownian motion used to model random share-price movements (random walk) in an efficient market.
Sharpe Ratio & Black-Scholes	Sharpe Ratio (William Sharpe): checks whether an investment's past reward justified its risk, using standard deviation of historical returns — says nothing about future performance. Black-Scholes formula: options/derivatives pricing model (Myron Scholes & Robert Merton, Nobel laureates; co-inventor Fischer Black died before the 1997 award) that enabled explosive derivatives-market growth from the early 1970s.
Q Theory (Tobin's Q)	James Tobin's (1981 Nobel) investment theory: firms should keep investing so long as "Tobin's Q" — market value of the firm ÷ net replacement cost of its assets — exceeds 1 (expansion profitable); if Q < 1, the firm is better off selling assets than retaining them.
Buyouts — MBO vs LBO	Management Buyout (MBO): a PE investor helps existing management buy out the promoters, taking a majority stake in return. Leveraged Buyout (LBO): acquisition financed mostly by debt (typically ~70:30 debt-to-equity ratio).
Vulture Funds & Sovereign Wealth Funds (SWFs)	Vulture Funds: privately-owned firms buying distressed sovereign debt of poor countries at deep discounts, then suing for full face value plus interest — undercutting HIPC debt-relief gains. SWFs: government-owned foreign-currency funds (originally Singapore/Norway; now China, Russia, Gulf states too) seeking higher-yielding overseas assets — flagged by India's National Security Advisor (2007) for strategic/sovereignty risk.
Carry Trade & Bubble	Carry Trade: borrowing cheaply in a low-interest currency (classically the Japanese Yen) to invest in higher-yielding currencies/assets elsewhere (equities in India, debt in US/NZ/Australia). Bubble: an asset-price rise unexplained by fundamentals that people keep holding on to — bursts to bring prices back to "real" levels.

19. CURRENCY SWAPS, FOREX SWAPS & GIFT CITY MECHANICS

Cue Words	Notes
Bilateral (Sovereign) Currency Swap — India-Japan & India-Sri Lanka	India-Japan (2018): $75 billion swap line — an "open-ended credit line" letting RBI draw yen/dollars on demand at the prevailing exchange rate, reversed after an agreed period at the same rate; India pays interest only on the amount actually drawn (Japan need not draw rupees for the deal to hold). India-Sri Lanka (July 2020): $400 million swap. RBI also runs a standing SAARC currency-swap facility with an overall corpus of $2 billion (2019-22 framework).
Corporate Currency Swap	Two multinational counterparties exchange loan principal in two currencies at the prevailing spot rate, each then servicing the other's interest rate in the borrowed currency, and re-exchanging principal at swap maturity (at the original or a pre-agreed rate) — used to access cheaper local-currency borrowing costs or hedge FX exposure on a foreign loan.
RBI Dollar-Rupee Forex Swap (competitive-premium auction)	RBI buys dollars from banks now (against rupees at the spot rate) and resells them back later at a premium; the bank offering RBI the highest premium wins the swap. Used in March 2019 to inject durable rupee liquidity once headroom for outright G-Sec OMO purchases was exhausted — improves lending-rate transmission too.
GIFT City IFSC — Legal & Investment Mechanics	An IFSC is deemed foreign territory; entities operating as IFSC units are treated as non-residents for FEMA purposes. Consequently, Indian investment into a GIFT-IFSC entity is routed as Overseas Direct Investment (ODI) under the Automatic Route. Resident individuals may invest up to USD 2,50,000/year (the LRS ceiling) into IFSC entities. India INX — BSE's IFSC subsidiary — lets any foreign company list shares/bonds/derivatives with tax incentives (no STT, no LTCG, MAT capped at 9%), purchasable by non-residents freely or by residents via the ODI route (subject to limits).

20. GLOSSARY: TRADING, IPO INVESTOR CATEGORIES & FUND-RAISING INSTRUMENTS

Cue Words	Notes
Algorithmic Trading	Also called automated/black-box/algo-trading — a computer program executes trades per pre-set rules on timing, price, quantity, or a mathematical model; increases market liquidity and removes emotion-driven trading.
Alternative Investment Fund (AIF)	A SEBI-regulated, privately pooled investment vehicle (established/incorporated in India) that collects funds from sophisticated Indian or foreign investors per a defined investment policy for their benefit.
Anchor Investor	A SEBI concept (since 2009): institutional investors invited to subscribe to shares before an IPO opens, to popularise the issue and build investor confidence ahead of the public offer.
Angel Investor	An individual (often family/friends) who invests personal money in high-risk, pre-revenue start-ups on favourable terms, focused on helping the venture take its first steps rather than immediate profit — the opposite of a venture capitalist, who deploys pooled third-party money; regulated in India under the AIF framework.
Bilateral Netting	An agreement letting two counterparties in a financial contract offset mutual claims to arrive at a single net payment obligation.
Crowd Funding	Raising small amounts of money from a large number of people, typically via an internet/social-media portal, to fund a project or venture — expands the investor pool beyond traditional owners/promoters.
Non-Convertible Debentures (NCDs)	Listed debt instruments with fixed tenure and a fixed interest rate, issued by companies to raise medium/long-term capital; unlike convertible debentures, they cannot be converted into equity shares.
Public Float	The percentage of a company's shares actually traded on the stock exchange (as opposed to promoter/employee/government-held locked-in shares); IPO minimum public float is 10%, rising to 25% within three years, with promoters retaining at least 20%.
Securitization	Pooling and repackaging financial assets (e.g., a bundle of loans) into marketable securities sold to investors, giving the originating bank/NBFC immediate liquidity; contrasted with a "Direct Assignment" sale of the loan papers themselves.
Sweat Equity	Shares issued to owners/employees (often at below-market cash salary) in return for their labour/effort rather than for cash payment — common in cash-strapped start-ups.
Stock/Share Warrant	A company-issued document giving the holder the right (not obligation) to subscribe to equity shares at a predetermined price within a set future window; forfeits the upfront payment if the option isn't exercised.

21. FUNDAMENTALS CHECK — CAPITAL MARKET BASICS

Cue Words	Notes
IPO vs FPO vs OFS	IPO (Initial Public Offer): An unlisted company issues shares to the public for the first time, becoming a listed company. FPO (Follow-on Public Offer): An already-listed company issues additional new shares to the public to raise fresh capital. OFS (Offer for Sale): An already-listed company's existing promoters/large shareholders sell their existing shares directly to the public/institutions on the exchange — no new shares are created and the company itself does not raise fresh capital (introduced by SEBI in 2012, mainly to help promoters meet minimum public shareholding norms).
Share vs Bond/Debenture — Basic Distinction	Share: Represents part-ownership in the company; return is a variable dividend (paid only if the company earns profit and declares it); shareholders bear higher risk but have unlimited upside and (for equity) voting rights. Bond/Debenture: Represents a loan given to the company/government; return is a fixed periodic interest/coupon, payable regardless of profit; holders are creditors, not owners, carry no voting rights, but rank above shareholders in claims on assets/income and generally carry lower risk.
Face Value vs Market Value vs Book Value of a Share	Face Value (Nominal/Par Value): The fixed value printed on the share certificate at issuance (e.g., ₹10 or ₹1), used for accounting purposes and to compute dividend %; does not change with market sentiment. Market Value: The current price at which the share actually trades on the stock exchange, driven by demand-supply, company performance, and market sentiment. Book Value: A share's value derived from the company's financial statements — (Total Assets − Total Liabilities) ÷ Number of Outstanding Shares — i.e., net worth per share based on the balance sheet, independent of market price.

22. GOLD-LINKED INSTRUMENTS — SGB, GOLD MONETIZATION SCHEME & GOLD ETF

Cue Words	Notes
Sovereign Gold Bonds — Additional Features	Government securities denominated in grams of gold — substitutes for holding physical gold. RBI issues these bonds on the strength of its gold reserves, on behalf of GoI. Interest rate is set similar to international rates of borrowing gold. Can be used as collateral (for loans). Per fiscal year (April–March): Maximum 4 kg of gold for an Individual and for a HUF; 20 kg for trusts and similar entities; Minimum 1 gram of gold. Time period 8 years, with exit option at the 5th, 6th and 7th year. Bonds are tradeable on the stock exchange. Interest is taxable, but not deducted at source (no TDS).
Gold Monetization Scheme, 2015	Bureau of Indian Standards (BIS)-certified Collection and Purity Testing Centres (CPTC) collect gold from customers on behalf of all scheduled commercial banks (excluding RRBs). Minimum 30 g of gold; Maximum — no limit. Objective: bring idle gold lying with Indian households into the economy and reduce gold imports. Even Central & State Governments can deposit gold under the scheme.
Gold ETF — Details	Passive investment instrument that aims to track the domestic gold price. Introduced/pushed since the Gold Monetization Scheme and Sovereign Gold Bonds were not successful enough in reducing demand for physical gold. 1 Gold ETF unit = 1 gram of gold. Exempted from Securities Transaction Tax (STT), Wealth Tax, VAT and Sales Tax.

23. MONEY MARKET & G-SEC INSTRUMENTS — ADDITIONAL DETAIL

Cue Words	Notes
Money Market — Definition	Money market instruments are highly liquid short-term financial assets traded with maturity under 1 year.
Treasury Bills — Additional Points	The safest money market instrument; a short-term liquidity instrument up to 364 days. Government issues bonds when it needs long-term money (e.g., 5 years). Proceeds are credited to the Consolidated Fund of India (NOT the Public Account). Issued by the Central Government to Financial Institutions; issued by RBI on behalf of the Government. Bought at a discount to face value (i.e., no interest payment). Central Govt issues T-Bills and bonds; State Govts issue only bonds (State Development Loans — SDLs), which are counted in SLR. 5 T-Bill types historically; 3 surviving: 14-day (intermediate T-Bills) — discontinued; 14-day (auctionable T-Bills) — discontinued; 91-day; 182-day; 364-day.
Dated Securities	Long-term instrument issued by government (to public or FIs) for borrowing, carrying interest payment — interest is a % of face value, paid at regular intervals (unlike T-Bills, which are bought at a discount to face value). Tenor 1–40 years (source also states "tenor can be up to 30 years" — older figure; the 1–40 yr range is the wider one). Individuals can also invest in G-Secs. States can only issue SDLs (T-Bills, CMBs and Dated Securities are issued by the Central Government). SDLs are counted in SLR.
Certificate of Deposit — Additional Detail	After Treasury Bills, the lowest-risk-category investment option; issued by commercial banks (excluding RRBs and LABs) and selected FIs. Differences from FD: CD is issued only for larger sums — generally used as an investment option by organisations for short-term surplus (though it can also be issued to individuals and NRIs); CD is freely negotiable and tradeable in the money market, unlike an FD. Tenure 7 days to 1 year; minimum value ₹1 lakh; issued in the format of a usance promissory note. CDs are issued in lieu of funds deposited at a bank for a specified time period — similar to savings accounts and virtually risk-free.
Commercial Paper — Additional Detail	Issued by large corporates to obtain funds to meet short-term obligations; backed by the issuing bank's or company's promise to pay the face amount on the maturity date specified on the note. Unsecured, and issued at a discount from face value. Maturity: source states "< 270 days generally" (per older/global convention; in India the current RBI norm in this file is 7 days to 1 year).
Commercial Bill	Bonds issued by one firm to another against a credit transaction. Can be discounted by banks.
Cash Management Bills vs WMA	CMBs are issued by the Government to meet temporary cash flow mismatches — the same function as Ways & Means Advances, but: WMA is a loan facility (not tradeable) whereas CMBs are bonds (tradeable); WMA is available to both Centre and States, while CMBs are only for the Centre. Non-standard, discounted instruments with maturity < 91 days — issued at a discount and redeemed at face value on maturity. Eligible as G-Sec for SLR purposes.
MIBID & MIBOR	MIBID (Mumbai Inter Bank Bid Rate): benchmark rate at which banks would like to borrow money from each other. Used as the benchmark for the majority of deals struck for Interest Rate Swaps, Forward Rate Agreements, Term Deposits etc. MIBOR (Mumbai Inter Bank Offer Rate): benchmark rate at which banks would like to lend to each other. India's version of LIBOR (London); used for Overnight Index Swaps.
Consolidated Sinking Fund (CSF)	Set up in 1999-2000 by RBI to meet redemption of market loans of States. Maintained in the Public Account of the State (outside the Consolidated Fund of the State) and not used for any other purpose. State governments contribute 1–3% of outstanding market loans to the CSF each year.

24. CAPITAL MARKET INSTRUMENTS, DEBENTURES & YIELD CONCEPTS

Cue Words	Notes
Capital Market Instruments — Overview	Long-term securities — comprising the Equity market and Debt market: equity shares, bonds, preference shares, debentures etc. More risky than money market, since they are less liquid and have long maturity. Split into Primary market and Secondary market.
Debentures — Additional Detail	Issued by corporates or government to the public against long-term loans (20–30 years). Not secured by collateral — backed only by the creditworthiness and reputation of the issuer. Holders get regular interest (coupon) payments. Convertible Debenture: hybrid instrument where the investor has the option to turn it into equity.
Bond Yield — Fundamentals	Face value: price fixed by the issuer. Coupon payment: annual interest on the bond. Bond Yield: effective rate of return/profit the bond earns — calculated by dividing the coupon by the (market) price [source: "dividing coupon rate by face value"]. Bond yield is inversely proportional to bond prices. Interest rates in the economy increase → bond prices decrease → yield increases. When the economy slows, people prefer government bonds → rise in demand and prices → fall in yield. When the economy grows → inflation rises → RBI raises rates → higher returns in other (private) investment options → more demand for private bonds → less demand for govt bonds → govt bond prices fall → yield increases. Hence bond yield is a useful parameter to assess economic health.
Yield Curve & Bond Yield Inversion	Yield Curve: graphical curve of yields for bonds over different time horizons. A growing economy → upward-sloping curve. Bond Yield Inversion: happens when the yield on a longer-tenure bond becomes less than the yield on a shorter-tenure bond. Signals a recession — shows investors expect future growth to fall sharply (i.e., demand for money will be much lower than today).
Additional Tier-1 (AT-1) Bonds — Yes Bank Crisis	Lowest priority in the repayment hierarchy — even lower than shareholders' money. RBI said AT-1 bonds would be written off in the Yes Bank case → AT-1 bond holders lose money. AT-1 bonds are perpetual bonds with a fixed annual coupon, used to fulfil the Basel-III criterion of 9.5% Tier-1 capital. Unsecured bond with no maturity date; carries a higher rate of interest than other secured bonds; listed and traded on the stock exchange.
Inflation Indexed Bonds (IIBs) — Index Used	Provide inflation protection to both principal and interest payments → give the investor a constant return irrespective of inflation levels. Eligible for SLR status. WPI is used for IIBs (per older series; there were subsequent proposals/"talks" of releasing IIBs indexed to CPI* — superseded by the CPI-linkage stated earlier in this file).*
Municipal Bonds — Additional Detail	Marketable debt instruments issued by Urban Local Bodies (ULBs) to on-lend towards project implementation by the ULB. Regulated by SEBI. Bangalore Municipal Corporation was the 1st ULB to issue municipal bonds, in 1997.
Masala Bonds — RBI Mandates & Firsts	Rupee-denominated offshore bonds — funds raised from the overseas market. Currency risk is on the foreign investor, since conversion of such bonds happens at the market rate on the date of settlement of the transaction (NOT at a pre-decided exchange rate). RBI mandates: any Indian bank or corporate is eligible to issue masala bonds; money raised cannot be used for real estate activities (except development of a township or affordable housing); cannot be used for investing in capital markets (e.g., purchase of land — not allowed). Minimum maturity: up to $50 mn → 3 years; above $50 mn → 5 years. Can be issued only in a country that is a member of FATF and whose securities market regulator is a member of IOSCO. Kerala became the first state to issue Masala Bonds — to rebuild after the floods (2019). Maharaja Bond: a rupee-denominated onshore bond.
Green Bonds	Debt instruments/bonds earmarked for green environment projects, released by financial institutions like the World Bank, IMF, commercial banks, governments etc. National-level guidelines issued by SEBI in 2016. India is the 2nd largest market of green bonds after China. Listed on India INX. Categories of projects: renewable energy, clean transportation, sustainable water management, climate change adaptation, energy efficiency, waste management, sustainable land use, biodiversity conservation. 2022 India's Sovereign Green Bonds Framework approved by FM Nirmala Sitharaman on 9 Nov 2022, fulfilling the Union Budget FY2022-23 announcement; strengthens India's NDC commitments under the Paris Agreement. Proceeds deployed in Public Sector projects that reduce the carbon intensity of the economy; a Green Finance Working Committee (GFWC) validates key issuance decisions. CICERO (Norway-based, independent Second Party Opinion provider) rated the framework "Medium Green" with a "Good" governance score, certifying alignment with ICMA's Green Bond Principles. (See also the Sovereign green bonds/thematic funds coverage above under blended finance.)
Elephant Bond	25-year sovereign bond proposed to bring back black money stashed outside India. A person gets immunity from prosecution if they invest 40% of their undisclosed money in this bond and pay 15% tax. Money to be used exclusively to fund the infrastructure sector. Recommended by the Surjit Bhalla Committee on Trade and Policy.
Women's Livelihood Bonds (WLBs)	World Bank + UN Women + SIDBI, exclusively for women. Will enable individual women entrepreneurs in sectors like food processing, agriculture, services and small units. Initial corpus ₹300 crore.
Bond-i (Bondi Bond)	Blockchain-operated bond launched by the World Bank — the world's first blockchain bond.
Infrastructure Debt Fund (IDF)	Investment vehicles to accelerate the flow of long-term debt to the infrastructure sector (an NBFC category). Bonds floated by an IDF can be subscribed in dollars or rupees. IDF income is exempt from income tax.

25. BHARAT BOND ETF, DEBT ETFs & CPSE/BHARAT-22 ETFs

Cue Words	Notes
Bharat Bond ETF	India's first corporate bond ETF — approved by CCEA; managed by Edelweiss AMC. A basket of bonds issued by CPSEs, CPSUs, CPFIs and other government organisations. Small unit size of ₹1,000 (to boost retail participation). Fixed maturity date — launched in 2 series: 3 years and 10 years, with a separate index for both series created by NSE. Received a strong response from investors and was oversubscribed by 1.7 times. Bharat Bond ETF is the debt ETF of the Government.
ETF vs Mutual Fund — Core Difference	ETF: basket of securities (index funds) that trades on an exchange like a stock; ETF share prices fluctuate all day as they are bought and sold. Mutual Fund: traded once a day, after the market closes. A Debt ETF is a basket of bonds only.
CPSE ETF & Bharat-22 ETF	CPSE ETF: the 1st ETF of the Government of India, launched 2014 — investors can buy shares in 10 PSUs (an energy-heavy portfolio) (source figure of 10 PSUs is from the original launch; this file's fact sheet notes 11 CPSEs after subsequent rebalancing). Bharat-22 ETF: shares and bonds of CPSEs, PSBs and strategic holdings of SUUTI (Specified Undertaking of the Unit Trust of India); managed by ICICI Prudential AMC.
Debt ETF Rationale (CCEA)	CCEA approved creation and launch of India's first corporate Debt ETF → would create an additional source of funding for CPSEs, CPFIs and other government organisations and increase retail participation in the Indian corporate bond market.

26. ALTERNATIVE INVESTMENT FUNDS (AIFs), ANGEL INVESTORS & ANGEL TAX

Cue Words	Notes
AIF — Definition & Regulation	AIF = any privately pooled investment fund (from Indian or foreign sources), under the jurisdiction of SEBI — SEBI (Alternative Investment Funds) Regulations, 2012. Investments do not happen via traditional modes of investment such as stocks, bonds, cash, property etc. Includes: Venture Capital Funds, Hedge Funds, Private Equity funds, Commodity funds etc. Excludes: Mutual Funds, Collective Investment Schemes, Family Trusts, ESOPs.
AIF — 3 Categories (basis: impact on economy & regulation)	Category I: have positive spillover effects; SEBI or GoI can consider some concessions. Generally invested in start-ups, social ventures, SMEs which the government considers socially or economically desirable. E.g., Venture Capital Funds, Angel Investors. Category II: no specific concessions given. E.g., Private equity, debt funds, real estate funds. Category III: have potential negative externalities and undertake leverage to a great extent. E.g., Hedge funds — unregistered private investment partnerships; not necessary to register with SEBI → largely unregulated.
Angel Investor & Angel Tax	Angel investors are often among family and friends; focused on helping the business succeed rather than reaping a huge benefit. A Category I AIF — venture capital fund. Angel Tax: levied on angel investments exceeding the fair market valuation of the company — intended to check money laundering. Exemptions: start-ups/companies with turnover < ₹100 crore and less than 10 years old.
NIIF as an AIF	National Infrastructure Investment Fund (NIIF): India's first Sovereign Wealth Fund (an investment pool of foreign currency reserves owned by the government); considered an AIF under SEBI regulation. Raises debt to invest in equity of infrastructure finance companies; Government owns 49%. 3 funds: Master Fund (infrastructure), Fund of Funds (housing, green infra — routed to fund managers with a good record in infra projects), Strategic Fund (greenfield & brownfield investments).
Broad-Based Funds	A fund established outside India in which no single individual holds more than 49% of the shares.

27. DERIVATIVES & DEPOSITORIES — ADDITIONAL DETAIL

Cue Words	Notes
Derivatives — Definition & Regulation	A security whose price is dependent upon or derived from one or more underlying assets → a contract between 2 or more parties based upon assets, whose value is determined by fluctuations in the underlying assets (e.g., stocks, bonds, commodities, currencies, interest rates and market indexes). Can be traded over-the-counter or on an exchange. Future contracts are the most common type of derivative — an agreement between 2 parties for sale of assets at an agreed-upon price. Derivatives are regulated by SEBI and RBI; earlier also by the Forward Markets Commission (FMC), which merged with SEBI in 2015.
Depositories — NSDL & CDSL Promoters	Depositories are institutions which hold securities in dematerialised (demat) form. 2 depositories in India, both regulated by SEBI: National Securities Depository Limited (NSDL) — promoted by NSE, IDBI, Unit Trust of India etc. Central Depository Services Limited (CDSL) — promoted by BSE, SBI, Bank of India etc.
Financial Market Infrastructure (FMI)	A multilateral system among institutions for clearing, settling, or recording payments etc. FMI refers to: Systemically Important Payment Systems (SIPS) — e.g., RTGS, for transfer of funds among participants; Clearing Corporation of India Ltd. Central Securities Depositories (CSD) — 2 in India: NSDL and CDSL — provide central safekeeping services, asset services (administration of corporate actions), record of legal ownership of security etc. Securities Settlement Systems (SSS) — enable securities to be transferred and settled by book entry. Central Counterparties (CCP) — interpose themselves between counterparties to a contract and ensure performance of open contracts. Trade Repositories (TR) — maintain a centralised electronic database of transaction data.

28. FPI/FII, PARTICIPATORY NOTES & DEPOSITORY RECEIPTS

Cue Words	Notes
FPI — Definition & QFI	FPI: investment through capital instruments by a person resident outside India in less than 10% of the capital of a listed company. (Investment in an unlisted company, or >10% of post-paid-up capital of a listed company, is FDI; once classified as FDI, even if holding falls below 10%, it stays classified as FDI.) QFI (Qualified Foreign Investor): a sub-category of FPI — any foreign individual, group, or resident from a country that is a member of FATF and a signatory to IOSCO's Multilateral Memorandum of Understanding (MMoU).
3 Mechanisms for FPIs — VRR, FAR, MTF	VRR (Voluntary Retention Route): a separate channel enabling investors (including FPIs) to invest in debt markets in India through easier rules in return for a longer commitment period. Investments are free of regulatory norms applicable to FPI investments, provided FPIs voluntarily commit to retain a minimum % of their investments for at least 3 years. Investment cap through VRR doubled to ₹1.5 lakh crore. Allows participation in Repo transactions & ETFs (NOT P-Notes). FAR (Fully Accessible Route): enables non-resident investors to invest in specified G-Secs with no FPI limit (other G-Secs carry a 6% limit). Domestic investors can also use this route. Medium-Term Framework (MTF): FPI limit on G-Secs is 6%, on SDLs 2%, and on Corporate Bonds 9% of total outstanding securities.
FDI vs FPI/FII — 8-Point Comparison	1. Instrument: FDI is only in equity/shares/ownership; FPI/FII is in both equity and debt (loan). 2. Market: FDI is through the primary market; FPI generally through the secondary market, but can happen through the primary market. 3. Capital: In FDI, generally new shares are issued and new capital comes to the company (which it invests in new factories, machines etc.); in FPI, generally only owners change hands and no new capital comes to the company. 4. Control: FDI investors purchase large shareholdings, appoint the Board of Directors and get involved in decision-making (active management); FPI investors purchase small shareholdings and do not get involved in management. 5. Target: FDI investors try to make the company profitable and target the profit of the company; FPI investors target the share price and derive gains from a rise in share prices. 6. Sector focus: FDI is sector-specific (e.g., a US steel company invests only in an Indian steel company); FPI is in the general capital market — the investor is not particular about any company/sector, only about share-price appreciation. 7. Horizon: FDI is a long-term investment; FPI is generally short-term. 8. Lock-in: FDI generally has a government-specified lock-in period (during which the investor cannot sell), making it quite stable; FPI has no lock-in — the investor can exit any time, making the currency volatile.
Participatory Notes — Why Popular	PNs are popular among foreign investors for investing in the Indian securities market because of: restrictions on foreign investments; exposure to local shares without incurring the time and costs of investing directly; they provide customized tools to manage risks; they are an important hedging tool for a foreign investor; and they are a safe and lucrative route to invest unaccounted/illegal money.
Depository Receipts — IDR vs ADR/GDR	A Depository Receipt is a financial instrument (security) issued by a company in a foreign jurisdiction; a negotiable security tradeable on a stock exchange, letting issuers raise funds outside their country. A DR is issued abroad and can be bought by a foreign investor. Indian Depository Receipt (IDR): rupee-denominated — enables foreign companies (NOT Indian companies) to raise funds from the Indian securities market. ADR/GDR: dollar-denominated — allows an Indian company to raise funds from a foreign securities market. ADR = American Depository Receipt (issued in the US on the basis of securities of an Indian company); GDR = Global Depository Receipt.
BoP Classification of Market Flows	Non-Debt Liabilities in the capital account: FDI, FPI (through FIIs), ADRs/GDRs. Debt Liabilities: Loans (ECBs, trade credit, external assistance, short-term external debt) and Banking Capital (NRI deposits). India's capital account has always remained positive (as a destination for investment) even before the 1991 reforms — FPI and ECBs were introduced only in the 1991 reforms.

29. MUTUAL FUNDS, CREDIT RATING & MARKET SURVEILLANCE — ADDITIONS

Cue Words	Notes
Side-Pocketing Rule	Introduced by SEBI after the IL&FS fiasco. A framework that allows mutual funds to segregate the bad (stressed/illiquid) assets into a separate portfolio within their debt schemes.
Credit Rating Agencies — SEBI Disclosure Norms	SEBI came up with a set of wider disclosure norms for CRAs, introducing a "probability of default" mechanism → CRAs have to disclose the probability of default for the issuers they rate. 7 CRAs registered with SEBI (as per this source): CRISIL, ICRA, CARE, India Ratings and Research, SMERA, Infomerics, Brickwork (SMERA was subsequently renamed/absorbed into Acuité Ratings* — the current list in this file reads CRISIL, ICRA, CARE, India Ratings, Brickwork, Infomerics, Acuité)*.
SEBI Data Lake Project	By SEBI — for improving surveillance, to monitor and analyse social media posts to keep tabs on market manipulation.
Investor Education and Protection Fund Authority (IEPFA)	Statutory body under the Ministry of Corporate Affairs, under the Companies Act 2013. Administers investor education, awareness and protection through investor awareness programmes across print, electronic and social media. The Fund holds unclaimed dividends, refunded/unclaimed application money, matured company deposits etc. not claimed within 7 years.
IEPFA Rules Amendment — Proposed (2026)	2026 Ministry of Corporate Affairs invited public comments on proposed amendments to the IEPFA (Accounting, Audit, Transfer and Refund) Rules, 2016, to simplify the refund process for low-value investor claims (unclaimed dividends, shares, matured deposits, debentures). Proposal aims for a reduced disposal timeline of 30 days, based on the company's verification report.
Investor Protection and Education Fund (SEBI) & Allied Funds	Investor Protection and Education Fund — by SEBI; houses SEBI's own contribution and donations from Centre and States for investor awareness. Depositor Education and Awareness Fund (DEAF) — by RBI; banks must transfer money from accounts not operated for over 10 years. Telecommunication Consumers Education and Protection Fund (TCEPF), 2007 — TRAI has directed telecom service providers to put all unclaimed subscriber money into this consumer protection fund.
National Financial Reporting Authority (NFRA)	Established in 2018 under the Companies Act, 2013. Responsible for audit policies & standards in the country; can impose sanctions against defaulting auditors. Audits companies listed on stock exchanges and those that function outside India.

30. PENSION SECTOR — PFRDA, NPS ELIGIBILITY & ESIC

Cue Words	Notes
PFRDA — Establishment Route	Interim PFRDA established in 2003 through a government resolution; later made a statutory body by the PFRDA Act, 2013. Regulates NPS and other pension schemes subscribed to by employees of the private and public sectors.
NPS — Eligibility & Coverage	Under the Ministry of Finance; a government-sponsored pension scheme launched in 2004 for government employees; in 2009 opened for all. Eligible: all citizens (Resident or NRI) and OCIs up to the age of 65 years; all new Central Government & central autonomous body employees joining after 2004, except the Armed Forces; all employees of state governments/bodies joining after the date of notification by the state government; any other government employee; all citizens including private employees and unorganised workers; NRIs/OCIs with bank accounts in India. OCIs are now equivalent to NRIs in NPS → both can invest in NPS Tier-1 accounts. Government will NOT contribute anything (for the all-citizen model). Funds managed under PFRDA.
Employees' State Insurance Scheme (ESIS)	Under the Ministry of Labour; provides social security + health insurance — insurance against sickness, death, disability etc., and provides medical care. Funded by both employer and employee. Regulated by the ESI Act, 1948; administered by ESIC (under MoLabour & Employment). Not applicable to seasonal factories etc.

31. FSDC, IFSC BODIES & MARKET-RELATED INSTITUTIONS

Cue Words	Notes
Financial Sector Development Council (FSDC) — Composition	Non-statutory body, set up on the recommendation of the Raghuram Rajan Committee (2008) on financial sector reforms. Responsibilities: inter-regulatory coordination and resolving regulators' disputes; strengthening and institutionalising the mechanism for maintaining financial stability; financial sector development along with monitoring macro-regulation of the economy. Chairman — Finance Minister. Members: heads of the financial regulators (RBI, SEBI, PFRDA, IRDA), Finance Secretary/Dept of Economic Affairs, Secretary Dept of Financial Services, CEA, and the Chairman of the Insolvency and Bankruptcy Board.
IBC Decade Conclave (2026)	2026 IBBI and INSOL India hosted the 3rd International Conclave 2026 in New Delhi (28 Jan 2026), marking a decade of the Insolvency and Bankruptcy Code (IBC). Justice (Retd.) Ramalingam Sudhakar, President of NCLT, was Chief Guest; the event reflected on IBC's transformative impact on India's resolution landscape, NCLT's improved implementation performance, and its role in reducing banking-sector NPAs.
Financial Sector Regulatory Appointments Search Committee (FSRASC)	Created on the recommendation of the Financial Sector Legislative Reforms Commission, 2011. Recommends names of chairpersons and members of Financial Sector Regulatory Bodies (including the Governor and Deputy Governors of RBI). Headed by the Cabinet Secretary. FSRASC recommends candidates (even names that have not applied) and sends them to the Appointments Committee of the Cabinet (headed by the PM).
India International Exchange (India INX)	India's first international exchange, located at GIFT City (Gujarat). Launched in 2017; a subsidiary of BSE Ltd. Green bonds are listed on India INX.
Usha Thorat Committee (offshore rupee markets & IFSC)	To examine issues related to offshore rupee markets and recommend policy measures to ensure the stability of the external value of the domestic currency. To examine the role International Financial Services Centres can play in addressing these concerns. To develop deep and liquid on-shore financial markets that act as a price setter of the Rupee globally.
Escrow Agent — Additional Detail	A third-party bank account safeguarding the seller against payment risk from its buyer. Control over cash flows is given to an independent agent (instead of the buyer), who ensures money is released as per agreed terms after the transaction. Widely used in PPP.

32. DISINVESTMENT ROUTES VIA CAPITAL MARKETS & BUYBACK TAX

Cue Words	Notes
Minority Stake Disinvestment — Market Routes	Can be done through: IPO; FPO (Follow-on Public Offering); Offer for Sale (OFS); CPSE Exchange Traded Fund (ETF) — through which the government can divest its stake in various PSUs across diverse sectors through a single offering; and Cross Holdings — one listed PSU takes up the government's stake in another listed PSU.
Majority Stake Disinvestment	Strategic Sale: sale of a substantial portion of government holding + management control (strategic disinvestment). PSUs identified jointly by DIPAM & NITI Aayog; proceeds go into the National Investment Fund (NIF), professionally managed to provide sustainable returns without depleting the corpus. Alternative Mechanism: a panel headed by the Finance Minister to speed up the strategic disinvestment process. Privatization: entire shareholding divested to a private entity + management control.
National Investment Fund (NIF)	Established in 2005 — all disinvestment funds go here. A fund of permanent nature, professionally managed by some public sector Mutual Funds, meant to provide sustainable returns to the government; corpus should not be depleted. Maintained outside the Consolidated Fund of India — in the Public Account. Earlier: 75% for social sector schemes, 25% for capital investment requirements of revivable PSUs. In 2013 these restrictions were relaxed: disinvestment proceeds go into the Public Account, and NIF can be used for — purchasing shares of CPSEs to maintain 51% ownership; recapitalisation of PSBs; investment by government in RRBs/IIFCL/NABARD/EXIM Bank; equity infusion in Metro projects; investment in Bhartiya Nabhikiya Vidyut Nigam Ltd and Uranium Corporation of India Ltd; investment in Railways towards capital expenditure.
Buyback Tax	Government proposed to tax buyback of shares by companies at 20%. Buyback: a scheme by which a company repurchases a certain amount of its outstanding shares — companies used this route to avoid paying Dividend Distribution Tax (DDT).

Financial Markets ​

Structure & Terms of Money Market ​

Key Money Market Instruments ​

Primary vs Secondary Capital Market ​

Shares, Debentures & Specialized Bond Instruments ​

Mutual Funds & Investment Vehicles ​

Derivatives & Hedging Instruments ​