Frequently Asked Questions (FAQ)

Financial Services

What do managerial competencies mean?

Managerial Competencies refer to the skills required for a job like effective communication, strong teamwork and customer focus. A manager’s competency is fairly evaluated on the basis of skills and knowledge he possesses.

What does Mudra Bank stand for?

Mudra Bank stands for Micro Units Development Refinance Agency (MUDRA). Prime Minister has launched Mudra Bank for benefitting small entrepreneurs. The Bank has set its target to cater to current 5.77 crore small business units across India to have access to credit through regular banking system.

What do you mean by Venture Capital?

It is the funding done by the Investors for starting up companies having high potential. It provides a strong start up to those companies who do not have access to capital markets.

What can be interpreted by the term ‘Islamic Banking’?

A Banking Activity that is consistent with the principles of Islamic rulings and is practically applicable to Islamic Economics. It operates as per the Islamic rules of transactions, rules of Shari’ah. Investments contrary to Islamic principles are considered sinful.

What are the priority sector advances?

RBI has given roles to the banks to provide advances to specific sectors like agriculture and small scale industries. It focuses on over all development of the economy rather than focusing on financial sector.

What is the role of Entrepreneur Development Institute?

It is a non-profit institute which was set up in 1983. EDI conducts various national and international training programs. It creates first generation entrepreneurs by developing their skills further.

What is understood by the term ‘Consortium Advances’?

It is the sanctioning of a term loan to a borrower jointly by all IFIs and Banks. The borrower can avail working capital limits from various banks due to large size of borrowings. The banks can also have a consortium for sanctioning credit limit to a borrower which then takes care of the entire needs of the borrower.

What is the need for credit rating of SSI units?

Credit rating scheme encourages SSI sector to improve its productivity, thus contributing to the economy. It makes access to credit quicker and cheaper which helps in economizing the cost of credit. SSI units also come under the obligation of updating the technological competence due to this rating.

What does ‘Mahila Vikas Nidhi’ desinged at large for?

Mahila Vikas Vidhi policy is specially designed to uplift women, thereby serving towards emancipation of women. It offers assistance to women in the development of income generating activities.

What does commercial viability stand for?

It is the assessment of the company to grow, succeed and be profitable. It marks the ability of a business or service to compete effectively.

What is Foreign Direct Investment (FDI)?

A foreign direct investment (FDI) is a controlling ownership in a business enterprise in one country by an entity based in another country. It includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra company loans". In a narrow sense, foreign direct investment refers just for building new facilities.

What does ‘External Commercial Borrowing’ refer to?

An external commercial borrowing (ECB) is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitized instruments such as floating rate notes and fixed rate bonds etc.

What are ‘Non Fund based Facilities’?

The credit facilities given by the banks where the actual bank funds are not involved are termed as ‘non-fund based facilities.’ These facilities are divided in three broad categories as under:-

  • Letter of Credit
  • Guarantees
  • Co-acceptance of bills/deferred payment guarantees
What do you mean by Foreign Currency Loan?

A loan denominated in a currency other than that of the borrower's home country, for which repayment terms are prearranged through the use of a forward currency contract. In case of large projects involving heavy capital equipments, foreign currency loans are emerging as an important source of project finance.

What is meant by Upfront Fees?

Upfront fees is the another name of Advance fee. A fee paid before a good is produced or a service is performed.The upfront fee is generally aportion of the total fee that the buyer must pay. Before signing up to any mortgage deal, check what up-front fees you may have to pay. Often, cash advances come with an upfront charge.

What is Debt Equity Ratio?

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage. 

What do you understand by Debt Service Coverage Ratio?

The debt service coverage ratio (DSCR), also known as "debt coverage ratio," (DCR) is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity's (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio is, the easier it is to obtain a loan.

What is a Break Even Point?

Point in time (or in number of units sold) when forecasted revenue exactly equals the estimated total costs; where loss ends and profit begins to accumulate. This is the point at which a business, product, or project becomes financially viable. The accounting method of calculating break-even point does not include cost of working capital.

What is the meaning of Internal Rate of Return?

IRR means the discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project.

What does Technical Feasibility involve?

Technical Feasibility, involves development of a working model of the product or service. It is not necessary that the initial materials and components of the working model represent those that actually will be used in the finished product or service. The purpose of the working model is to demonstrate, to your own satisfaction, that the product or service is functional and producible. It also provides a visual means to share your concept with others.