creditors meaning

Creditor: is the one (person, bank, entity) who lends money.

Creditor gives credit (not receives credit). 

This term is opposite to Debtors (one who borrows money).

One way I remember meaning of creditor is by this statement: "creditor is predator". If you owe money to a creditor he'll constantly pester you for money! ;)

There are 2 types:

a) Un-secured creditor: 

This type of credit is not secured by any collateral (security). It's like your Credit Card, who has lend you some money. And they usually charge more interest rates for that!

b) Secured creditor: 

Real creditors (banks, finance companies etc) gives credit after legal contracts only. If they fail to receive their money back - they can take things to court. Their Loan is against some asset only, which they can sell if they don't receive back their money.

25 Important Currencies of World

Important International Currencies:

Here are some extremely important currencies from MCQs point of view. They've been asked in many competitive exams:

  1.    Malaysian - Ringgit
  2.    Thailand - Bhat
  3.    China  - Yuan Renminbi
  4.    South Korean - Won
  5.    Japanese  - Yen
  6.    New Zealand - Dollar $
  7.    Swedish  - Krona
  8.    U.S. - Dollar 
  9.    Australian - Dollar 
  10.    Canadian -  Dollar 
  11.    Hong Kong -  Dollar
  12.    Singapore - Dollar
  13.    Swiss - Franc
  14.    Russia - Rubal
  15.    UAE - Dirham
  16.    Turkish - Lira
  17.    British - Pound
  18.    Argentina  - Peso
  19.    Chile -  Peso
  20.    Columbia -  Peso
  21.    Maxico - Peso
  22.    Brazil - Real
  23.    South Africa - Rand
  24.    Philippines - Peso
  25.    Indonesian - Rupiah

4 important concepts of Elasticity made simple

4 Elasticity Concepts in 5 Minutes

Elasticity is a very basic economics concept. It's used in many economics studies. When you complete this page, you'll be able to grasp it & use it in your answers in such a way that professors, interviewers would love to listen:

Elasticity is how flexible demand/supply is in response
to a change in price (or other variable).

1) Price Elasticity of Demand (PED): 

What does it means? It simply means if you change price of a product how'll demand for it will behave.

Suppose you are CEO of a company you would try to figure out how much change in price of your product will increase its demand or sales!

If you're CEO of some luxury stuffs co. then probably reducing price won't help you much. Because if it's not pricey then its not luxury. Isn't it?

Price In-elastic Demand: Apple iPhone 5C 

PED, price elasticity demand, economics, rbi grade b, sbi po, ibps,
iPhone 5C pic by flickr janitor

Apple launched both iPhone 5S (high end) & 5C (ridiculed as C for cheap) According to some reports iPhone 5C sales were not impressive. And some intellectuals are criticizing Apple for venturing into low-cost mobiles as their price & cult-culture is what separates it from others. May be that's why the legendary Steve Jobs never actually gave any thought of making "cheaper mobiles".

So we would say demand of iPhone 5C is price inelastic! Demand is not responding to change in pricing. Another way to see it: if price were reduced by 40%, demand increased by may be 2-3% - that's what we call price in-elasticity.

Price elastic Demand: Burgers

Take another case: What if you are CEO of McDonald? Reduce price or not. Well, here is some piece of news, reduce price & increase sales. So when you reduce prices by say 25% & demand increase by say 40% then we say Burger sales (demand) are price elastic!

Now lets see another easy concept.

2) Income Elasticity of Demand (YED):

(letter 'I' is for Investment, so Y for income).

What does it means? It simply means if you change real Income levels how'll Demand behave.

Normal Goods & Inferior Goods

With increase in real income demand for 'normal goods' increase. More money with people they'll spend it.

However there are some goods whose demand will decrease with increasing income for e.g. bus tickets because people will take taxis, cars etc. such goods are called 'Inferior goods'.

Luxury goods are more income elastic than necessities. Because people will buy luxuries with rise in income!

Consider this: When your income goes up, what would you do? Buy Apple iPhone - 5S of course, eat out with friends in expensive restaurants, go for holidays... and so on. You are creating more demand by spending more, because now your income is more.

What if your income goes down? Probably you'll eat at home, prefer low-cost types of mobiles, take public transport instead of taxis etc.

Here's a study to understand these concepts better - don't go into too much details just read Executive summary only. But before that read this Elasticity part 2. Here's excerpt:

"An average income elasticity of 1.65 is estimated for inbound tourism. A 1% increase in GDP (Income)... would lead to an increase in tourism expenditure in the UK of 1.65%."

That's roughly to say that if you raise income by 1%, Britishers tourism expenditure increase by 1.65%. So hotel-room demands are income elastic!

YED, income elasticity demand, economics, rbi grade b, sbi po, ibps,
Jumeriah Hotel by flickr adteasdale

3) Cross Elasticity of Demand (XED):

 is a measure which shows how much demand of a good will change in response to change in price of another good.

Coke & Pepsi are 2 subtitute goods. If coke reduce it's price, Pepsi sales will be affected.

Tea & Chai-Masala are 2 pretty strong compliments ;). Tea & Sugar can be said as good compliments.

4) Price Elasticity of Supply (PES):

What does it means? It simply means if you change prices of a good how'll (& how quickly) supply behave.

Now suppose you are an Onion supplier!

Should I tell you more? I don't think so if you are in India. When prices increase, you would rush to book max profit. You'll increase supply & sell more & more...

PES tells us how quickly suppliers are able to react to the price change. If suppliers are able to react quickly we say the supply is price elastic.

So Onion supply is price elastic.

Supply is said to be price inelastic when suppliers are not able to increase supply when price is high. Similarly they are not able to restrict supply when price goes down.

Suppose you're Onion farmer, what would you do when prices shoots up. Actually you can't do anything because onion corps are ready in 5 months. By the time your fields are ready prices would come down.

A very important concept in it is: Commodities like Agricultural produce, Mining are price inelastic.

But if seen over a longer period of time then even commodities are elastic. If Basmati rice fetch good price for farmers, then over a longer period of time, farmers will produce more of it!

Banking News Notes Dec 2013

Important Banking News: 

This piece of information is must read for bank exams:

-> Paperless banking facility: Axis Bank Ltd has launched the e-KYC initiative to facilitate paperless banking to Aadhaar card holders at Mumbai. With this step, Axis Bank became the first bank to allow customers to open an account with just their Aadhaar number.

->SARFAESI Act: The most effective tool to recover bad loans; Amidst rising NPAs, the SARFAESI Act was the most potent tool in the hands of banks for recovering bad loans as the Act empowers banks to recover NPAs without the intervention of courts by providing three alternative methods — securitisation, asset reconstruction and enforcement of security — without the intervention of courts. 

According to the RBI’s Report on Trend and Progress of Banking in India, 2012-13, banks have recovered Rs 18,500 crore through the Sarfaesi route. Also, in terms of efficiency, the Act has proved to be more effective than the DRTs or mediation by Lok Adalats. 

“Under the Sarfaesi Act, notice is served and two-months’ time is given to the borrower to discharge his liabilities, but DRTs (despite clear instructions from the Supreme Court that they cannot give stay orders on Sarfaesi) are still giving stay orders and eventually, the stay order is lifted but in the process one to one-and-a-half years is lost, without any benefit to any party. 

Also, the rising levels of stress across the banking system was reflected in the fact that the number of cases under all the three mechanisms saw a massive increase of 66 per cent to 10.45 lakh cases.

-> Bharatiya Mahila Bank (BMB) will offer 4.5% on Savings Bank balances up to Rs 1 lakh and 5% on balances above Rs 1 lakh. 

Set up with a capital base of Rs 1,000 crore, is the first bank started in the public sector space by an Act of Parliament (other public sector banks were nationalised in two tranches in 1969 and 1980). It will predominantly serve women customers, it will serve men too.

-> Technology-related banking frauds in India have fallen in the last four years due to stepping up checks on on-line transactions by the banks. According to the RBI Data, during current financial year, 8765 tech-related frauds were reported, a 13% drop over the previous fiscal.

-> Liquidity support to MSME sector: The liquidity support comes in the wake of slowdown in the economy which has resulted in liquidity tightness in a large number of MSEs in the manufacturing and services sector, particularly due to delayed settlement of receivables from large corporate, public sector undertakings and government departments.

 In view of the need to ease the liquidity stress to micro and small enterprises (MSE) sector which is employment intensive and contributes significantly to exports, RBI has been to provide refinance of an amount of Rs. 5,000 crore to the Small Industries Development Bank of India (SIDBI) under the provisions RBI Act, 1934. The facility will be available up to March 31, 2014.

-> FI limit in AXIS Bank increased: The Cabinet committee on economic affairs (CCEA) has approved the proposal of Axis Bank for increase in foreign investment from 49% to 62% entailing an inflow of about Rs 7,250 crore. Following the inflow and hike in stake by foreign investors, the bank will become foreign-owned, whereby every future investment in seven subsidiaries will be governed by the foreign direct investment policy.

-> Next commonwealth summit in 2015: Malta, a Southern European country was unanimously chosen as the host of the next Commonwealth summit

-> New CMD for corporation bank: S. R. Bansal

-> New MCX-SX chairman: Former Union Home Secretary G.K. Pillai has been appointed as Chairman of MCXSX.

Height of global inequality: rich-poor gap widening

Height of Global Inequality!

A very shocking report is published by Oxfam which reports that: a tiny group of 85 richest people own as much as 3.5 billion poor! wtf.

Some points of the study can be used in essays, answers regarding global inequality, poverty or to point out failure of democracy, taxation policies.

Important Points for essays

a) Wealthy groups have co-opted political power, thus undermining democracy in a country including India. This group then create rules which is in favor of those having high income.

b) Since the late 1970s tax rates for rich have fallen. In last 25 yrs wealth have concentrated even more in the hands of few families. Around 1% of rich families own around 50% of wealth.

c) In India since last decade no. of billionaires have increased tenfold thanks to 'highly regressive tax structure' & 'political connections'.

All this bends the rules of economic game in favor of fittest group. In the end rich are getting richer & poor are becoming even more poor. Govt spending on poor is low.

Some of the policies in favor of rich are: Tax havens & secrecy, financial deregulation, anti-competitive business practices & cuts in public spending.

RBI Inflation linked bonds: important points to remember

 Inflation Indexed National Saving Securities- some important FAQs from exam point of view:

a) Inflation rate for these bonds will be:  Final combined CPI (consumer price index) base: 2010, with lag of 3 months.

b) Eligibility: only retail investor. Individuals, HUFs, charitable institutions, Universities. Maturity period is 10yrs.

c) Interest Rate: 2 parts: i) fixed part: @ 1.5% p.a. (ii) variable: inflation rate.

This fixed rate of interest also acts as floor rate, in case there is deflation in economy.

d) Interest gets accrued & compounded on half yearly basis.

e) Minimum limit: Rs 5000/-, Max- 5lacs per annum per applicant.