Glossary Of Financial Terms starting with R

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List of Financial Terms (Alphabet Wise)

Random Walk Theory A proposition that describes the movement of share prices as being random, i.e., devoid of any definite pattern. This assertion, therefore, challenges the very basis of TECHNICAL ANALYSIS, especially CHARTING which rests on the idea of trends in share prices. (See also EFFICIENT MARKETS HYPOTHESIS.)

Ratio Analysis The use of financial ratios for assessing the financial ratios for assessing the financial performance and financial position of a company by means of various ratios that relate to the LIQUIDITY, turnover, profitability, etc., of a company.

Reddy Committee A working group on matters relating to money supply which was appointed in December 1997 under the Chairmanship of Y.V. Reddy of the Reserve Bank of India (RBI). Its terms of reference sought, among other things, an assessment of the adequacy of existing money stock measures and suggestions to improve the existing reporting system.

The committee submitted its report in June 1998, which includes the following recommendations :
  • The introduction of a new set of monetary and liquidity aggregates as detailed below.
  • A comprehensive commercial bank survey to be carried out, which would reflect the changing scope of their activities.
  • Compilation of a comprehensive financial sector survey in order "to capture the dynamic interlinkages" between depository corporations (banking sector) and FINANCIAL INSTITUTIONS.
Refinance The system of borrowing by a bank or other financial intermediary from an apex institution or the CENTRAL BANK of a country, on the strength of its loans or financial ASSETS. Thus, for instance, IDBI and NABARD provide refinance to a host of banks and institutions vis-à-vis the loans made by the latter to ultimate borrowers. Refinance may also be increased by the Reserve Bank of India as a short-term measure to douse a sudden flare-up in MONEY MARKET rates, e.g. the CALL MONEY rate.

Reinsurance An arrangement under which an insurer shares the risk of large losses with another insurer. Through reinsurance, an insurance company spreads the risk of excessive loss on big contracts. The arrangement helps to dilute exposure and retain financial flexibility.

Reinvestment Rate The rate of interest at which the cash flows from an investment (e.g., coupon from a DEBENTURE or in-flows from a project) are periodically reinvested. This depends on the investment choice available during the term of a security or project. However in the case of a ZERO-COUPON BOND, the problem of having to reinvest does not arise since there is no periodic cash flow. The reinvestment rate is unvarying and is the same as its YIELD TO MATURITY, (See also YIELD TO MATURITY)

Rekhi Committee A committee on INDIRECT TAXES, that submitted its report in 1992, containing recommendations for simplification and streamlining of customs and central excise laws and procedures.

Revaluation The meaning of this term depends on the context in which it appear.

With reference to foreign exchange it denotes an upward revision of a currency's official exchange rate vis-à-vis other currencies or in relation to gold. It may be noted that INFLATION in a country has a similar consequence as revaluation, since exportable goods become more expensive to foreign buyers. In finance, the term refers to a fresh valuation of FIXED ASSETS of a company such as land and machinery by an approved valuer. Revaluation helps to establish realistic values of assets in place of historical costs since market prices and realizable values are taken into consideration by the valuer. (See also REAL EFFECTIVE EXCHANGE RATE).

Scheduled Bank A bank that is registered in the Second Schedule to the Reserve Bank of India (RBI) Act, 1934. To be included in the schedule, a bank must fulfill certain conditions that include :

  1. The PAID-UP CAPITAL and reserves must be at least Rs.5 lakh.
  2. Its conduct must not be to the detriment of its depositors.
  3. Scheduled banks are required to maintain cash reserves with the RBI as prescribed. In return, they enjoy certain privileges from RBI such as borrowing facilities and remittances at concessional rates.