Bank Rate

Bank Rate

The rate of interest charged by the Reserve Bank of India (RBI) on financial accommodation extended to banks and FINANCIAL INSTITUTIONS. The support is provided in the form of a bills rediscounting facility and advances or REFINANCE against specified ASSETS (e.g. TREASURY BILLS and DATED SECURITIES) or PROMISSORY NOTES. The intent behind changing the Bank Rate at certain junctures is to raise or lower the cost of funds that banks obtain from the RBI. This, in turn, would alter the structure of banks' interest rates and thereby serve to curb or encourage the use of credit. However, the Bank Rate is a relatively passive instrument of credit control. In the wake of the East Asian currency crisis, the RBI used the Bank Rate in conjunction with the CASH RESERVE RATIO and other measures to stabilize the exchange rate of the Rupee. In recent times, it has been RBI's endeavor to make the Bank Rae and effective signaling device as well as a reference rate. However, since frequent changes in the Bank Rate may be undesirable, the short-term REPOS interest rate seems to be a useful supplement in influencing the flow and cost of funds in the short term.

Asset Management Company (AMC)

Asset Management Company (AMC)

A company set up for floating and managing schemes of a MUTUAL FUND. An AMC earns fees by acting as the PORTFOLIO manager of a fund. The AMC is appointed by the Board of Trustees, which oversees its activities. Thus, a mutual fund is generally established as a trust by a SPONSOR, which could be a registered company, bank or FINANCIAL INSTITUTION. Also, a custodian and a registrar are appointed to ensure safe keeping of the fund's securities and to deal with investors' applications, correspondence, etc.