Role of Reserve Bank of India (RBI)

As a central bank, the Reserve Bank has significant powers and duties to perform. For smooth and speedy progress of the Indian Financial System, it has to perform some important tasks. Among others it includes maintaining monetary and financial stability, to develop and maintain stable payment system, to promote and develop financial infrastructure and to regulate or control the financial institutions.

Issuer of currency 

Except for issuing one rupee notes and coins, RBI is the sole authority for the issue of currency in India. The Indian government issues one rupee notes and coins. Major currency is in the form of RBI notes, such as notes in the denominations of two, five, ten, twenty, fifty, one hundred, five hundred, and one thousand. Earlier, notes of higher denominations were also issued. But

Reserve Bank of India (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held shares of nominal value of Rs. 2,20,000.

Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten

Initial Public Offering

What is an IPO?

In financial terms, IPO or initial public offering is the first issuance of a company's shares to the general public. It is called as primary market. These shares are allowed to be transacted in the stock market where they can be bought and sold. It is called secondary market. In other words, An IPO is defined as an exercise when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. One thing to note is the shares allocated to the public do not constitute 100% of the company's shares. Only a certain percentage is allocated to the public. Usually the company owner or the board of directors will still hold the majority of the shares.

What is the need of IPO?

Organization offer IPO is to raise capital for their organization. The main reason is because companies plan to use the money gathered from IPO to further expand their business or to increase their business operations. Legal compliance and financial regulations that needs to be followed during IPO process.

Procedure for issue of IPO

Step :1(Assigning Underwriter)

Company needs to set up underwriters. Underwriters are nothing but investment banks. The purpose of underwriters is to assess the business. Underwriters are used to analyze operational and financial background of the company in order to determine the value of the company's shares to be sold to the public. The company will sign an agreement with the lead underwriter to sell shares on the market and the underwriters can proceed to sell these shares to any interested investors. For large corporations dealing with billions of dollars of shares, several large investment banks may act as underwriters. These banks are paid commissions for shares that they sell. The underwriters will also help the company deal with the legal and financial regulations imposed by the country.

Step :2 (Performing Legal procedures)

While launching IPO, they reserve some percentage shares for various categories such as Retail investors, Institutional Investors and Employees. As soon as the IPO is successfully launched, companies will need to submit their annual business earnings reports to the financial securities board since the company's shares will be listed in the stock market. It changes based on the country. In India, it is SEBI.

Step : 3(Grading)

IPO-grading is nothing but Grade which assigned by a Credit Rating Agency registered with Financial securities. Shortly, it is called as CRISIL . The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities in India. These grading is generally assigned on a five-point benchmark

grade 1 : Poor fundamentals

grade 2 : Below-average fundamentals

grade 3 : Average fundamentals

grade 4 : Above-average fundamentals

grade 5 : Strong fundamentals

Types Of Mutual Funds

Types Of Mutual Funds

By Structure

• Open Ended

These are schemes that do not have a fixed maturity. The mutual fund ensures liquidity by announcing sale and repurchase price for the unit of an open-ended fund.

• Closed Ended

These are schemes that have a fixed maturity. The money of the investor is locked in for the period. Occasionally, closed-end schemes provide a re-purchase option to the investors, either for a specified period or after a specified period. Liquidity in these schemes is provided through listing in a stock market; however this option is not yet available in India.

• Interval Schemes

These combine the features of open-ended and close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV related prices.

By Investment Objective

• Growth Schemes

Aim to provide capital appreciation over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation.

These schemes are not for investors seeking regular income or needing their money back in the short term.

• Income Schemes

Income Schemes Aim to provide regular and steady income to investors. These schemes generally invest in

fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

• Balanced Schemes

Aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents.  In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls.

• Money Market / Liquid Schemes

Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short term instruments such as treasury bills, certificates of deposit, commercial paper and inter bank call money. Returns on these schemes may fluctuate, depending upon the interest rates prevailing in the market.

Other Schemes

• Tax Saving Schemes (Equity Linked Saving Scheme - ELSS)

These schemes offer tax incentives to the investors under tax laws as prescribed from time to time and promote long term investments in equities through Mutual Funds.Eligible for deduction under section 80C .Lock in period three years

• Index fund

Index fund schemes are ideal for investors who are satisfied with a return approximately equal to that of an index.