Glossary Of Financial Terms starting with I

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List of Financial Terms (Alphabet Wise)

ICICI An acronym for Industrial Credit and Investment Corporation of India Limited, which is a private sector term lending institution set up in 1955. Its sponsors include foreign institutions, notably the World Bank. Besides granting term loans, particularly foreign currency loans, it assists businesses by DISCOUNTING bills, providing LEASE finance, managing PUBLIC ISSUES and providing VENTURE CAPITAL. The corporation has also been instrumental in setting up other important institutions such as Credit Rating and Information Services of India Limited (CRISIL) for credit rating. Technology Development and Information Company of India (TDICI) for the promotion of indigenous technology and SCICI for financing the shipping industry. In its drive towards becoming a global financial supermarket, ICICI's new thrust areas are banking, financial advisory services and MUTUAL FUNDS.

ICRA An acronym for the credit rating institution. Investment Information and Credit Rating Agency of India Limited, which has subsequently been rechristened as ICRA Limited. The agency has been promoted by various financial institutions including Industrial Finance Corporation of India, State Bank of India and Unit Trust of India. The role of this agency like Credit Rating and Information Services of India Limited (CRISIL), is to assist investors in assessing the credit risk of various securities such as BONDS and COMMERCIAL PAPER, by assigning letter ratings. (See EQUITY GRADING.)

IDBI An acronym for the Industrial Development Bank of India, which is the apex term lending institution in the field of industrial finance. From 1976, IDBI has been functioning as a separate entity, wholly owned by the Government of India. In 1995, IDBI issued equity shares through public subscription. It is active in providing finance through term loans, DISCOUNTING and REDISCOUNTING of bills, REFINANCING loans granted by State Financial Corporations and banks. It has also subscribed to securities of FINANCIAL INSTITUTIONS. Besides these activities, IDBI also performs the important task of coordinating the functions and operations of other term lending institutions in the country. IDBI has played a key role in setting up Small Industries Development Bank of India (SIDBI) and more recently, the National Stock Exchange and Credit Analysis and Research (CARE). Like other financial institutions venturing into newer areas. IDBI has turned to leasing, asset credit and merchant banking.

IFCI The oldest of the term lending institutions, Industrial Finance Corporation of India was set up by the Government of India in 1948 to provide medium and long-term finance to businesses in the private sector. Over the years, IFCI has diversified its activities to leasing and merchant banking. IFCI is also responsible for establishing among others, the Tourism Finance Corporation of India Limited, the Management Development Institute in Gurgaon, and Technical Consultancy Organizations in different states. In late 1993, it floated a PUBLIC ISSUE of equity shares after its conversion into a company. Earlier, IFCI was forbidden from raising funds through debt or equity.

IL&FS An abbreviation for the finance company, Infrastructure Leasing and Financial Services Limited. As the name suggests, its area of focus is financing major infrastructure projects such as highways, bridges and power plants, IL&FS is also active in leasing, advisory services for infrastructure projects and stock broking. Its promoters include Central Bank of India and Unit Trust of India. (See also TOLL BOND.)

In-the-Money An expression used to indicate that an OPTION has an immediate tangible value because of the difference between the current market price of the share and its exercise price. For example, if a company's share is trading at Rs.110 while its call has an exercise price of Rs.100, the option is said to be in the money. (See also OPTION).

Income Bond A hybrid debt security which promises interest only if a certain level of net income is earned. This type of security is generally associated with rehabilitation schemes under which no immediate burden is placed upon companies as they gradually return to good financial health. After a few years, the interest LIABILITY may be made cumulative.

Index Fund This is a MUTUAL FUND whose PORTFOLIO mirrors a market index. The investments of such a fund are in the same stocks as those comprising the selected market index and in the same proportion as their weights in the index. Setting up the portfolio is called 'Indexing'. This innovation in the U.S. sprung up as a result of research findings that the Standard & Poor's 500-stock index (a proxy for a market portfolio) had outperformed many INSTITUTIONAL INVESTORS during 1960s and 1970s. Since the portfolio of an index fund replicates a certain index, the fund saves substantially on research and administrative expenses. The Index Equity Fund launched by the Unit Trust of India in May 1997 is based on stocks figuring in the SENSITIVE INDEX and the NSE-50 of the NATIONAL STOCK EXCHANGE.

Inflation The phenomenon of rising prices of goods and services in general. It can come about due to a scarcity of supplies in relation to demand; this is known as 'demand-pull inflation'. It may also result from an increase in the cost of some critical input, such as steel or petroleum, which then triggers off a gradual rise in prices in general; this is known as 'cost-push inflation'.

Insider A term used for one who has access to information concerning a company, that is not publicly available and is of such a nature that it enables him or her to make substantial profits in share transactions.

Intercorporate Deposit A short-term deposit made by one company with another. The period usually does not exceed six months, and it could be as short as one or a few days. These deposits are essentially "brokered Deposits" given the extensive involvement of brokers. The interest rate is influenced by market forces and is, generally, significantly higher than the banks' lending rate of WORKING CAPITAL.

Interest Rate Parity Theorem A theorem that explains how the forward and spot currency exchange rates between two countries are related through their respective nominal interest rates. For example, assume that the spot rate between the U.S. dollar and the Deutsche Mark is $1 – DM2 and that the prevailing annual rates of interest on the dollar and the mark are 18 and 10 percent respectively. Therefore, over a period of 30 days, the interest accruing will be 1 x (18/100) x (30/300) = $0.015 and 2 x (10/100) x (30/360) = DM0.0167. Thirty days hence, $1.015 is equivalent to DM2.0167. Thus, the forward rate should be $1 – 2.0167/1.015 = DM1.968.

Investment Account The PORTFOLIO of long-term securities held by a bank that usually consists of GOVERNMENT SECURITIES, high-grade DEBENTURES and shares.