IIFCL Grade A key terms

The interest rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities, used as the main tool to signal and steer the policy interest rate.

The rate at which the RBI absorbs surplus liquidity from banks by borrowing against eligible securities; it sits below the repo rate within the liquidity adjustment framework.

The share of a bank's net demand and time liabilities that must be held as cash with the RBI, earning no interest and directly reducing funds available for lending.

The minimum percentage of net demand and time liabilities a bank must hold in approved liquid assets such as government securities, cash and gold, in addition to cash reserve requirements.

The aggregate of demand and time deposits and other liabilities owed by a bank to the public and to other banks, adjusted for interbank and netting rules, on which reserve ratios are computed.

The RBI's framework of repo and reverse repo operations through which banks borrow or park short-term funds against eligible collateral, keeping overnight call money rates near the policy rate.

A window allowing banks to borrow overnight against excess government securities beyond the statutory liquidity ratio holding, priced above the repo rate as a penalty rate.

The six-member statutory body at the RBI that sets the policy repo rate to achieve the inflation target, with decisions taken by majority vote and published with reasoning.

A retail price index measuring the change in prices of a representative basket of goods and services consumed by households, used as the nominal anchor for India's inflation targeting framework.

An index tracking price movements at the wholesale or producer stage across primary articles, fuel and manufactured products, often used to gauge pipeline price pressure in the economy.

The excess of total government expenditure over total receipts excluding borrowings, indicating the amount the government must borrow to fund its spending in a year.

The gap between revenue expenditure and revenue receipts of the government, showing the extent to which routine spending is not covered by routine income.

The fiscal deficit minus interest payments on past debt, showing current borrowing needs after setting aside the burden of legacy interest obligations.

The freedom to convert domestic currency into foreign currency and back for capital transactions such as investment and borrowing, currently applied only partially in India.

The freedom to exchange domestic currency for foreign currency for trade in goods and services, remittances and other current transactions, which India adopted in 1994.

An international reserve asset created by the IMF and valued against a basket of major currencies, used to supplement member countries' official reserves and settle obligations among them.

Assets held by the central bank in foreign currency, gold, SDRs and reserve tranche position with the IMF, used to defend the exchange rate and meet external obligations.

Ensuring that households and small businesses have access to affordable, usable financial services such as bank accounts, credit, insurance and payments, supported in India by schemes like Jan Dhan Yojana.

Mandatory minimum lending by banks to specified sectors such as agriculture, micro and small enterprises, housing and weaker sections, set as a percentage of adjusted net bank credit.

India's 2016 law creating a time-bound corporate insolvency resolution process administered by resolution professionals, the NCLT and the Insolvency and Bankruptcy Board of India.

A loan or advance on which principal or interest has remained overdue for more than ninety days, requiring the lender to classify it as substandard, doubtful or loss.

An entity registered with the RBI that buys bad loans from banks at a discount and attempts recovery or restructuring, freeing lender balance sheets of stressed assets.

Lending or investing in a project where repayment depends mainly on the cash flows the project itself generates, with limited recourse to the sponsors' balance sheets.

A legally separate company created to own, build and operate a single project, isolating its risks and cash flows from the sponsors and providing the vehicle for lenders to lend against.

The contract between a government authority and a private developer granting the right to build and operate an infrastructure asset for a defined period, setting tariffs, service standards and handback terms.

A long-term contractual arrangement in which public authorities and private partners share the financing, construction and operation of infrastructure, allocating risks to the party best able to manage them.

A government grant, typically a capital subsidy, given to make an infrastructure project commercially viable when user charges alone cannot cover costs and a reasonable return.

A measure of a project's ability to meet scheduled principal and interest payments, calculated as cash available for debt service divided by debt service due in the same period.

A funded reserve held in an escrow, usually equal to a few months of debt service, that lenders can draw upon if project cash flows fall short of scheduled repayments.

A bank account controlled by an agreement among borrower, lender and trustee, into which project revenues are paid first so that funds are applied in an agreed priority order.

A contractual priority order in which project cash is applied, usually running from operations and maintenance costs and taxes to debt service, reserves, and finally distributions to sponsors.

The discount rate at which the present value of a project's expected cash inflows equals its outflows, giving a single percentage return used to compare investment options.

The sum of a project's expected cash flows discounted at the cost of capital, less the initial investment; a positive value indicates the project adds value.

A valuation method that converts future cash flows into today's value by applying a discount rate that reflects time value of money and project risk.

The weighted average return required by a firm's debt and equity investors, used as the hurdle rate for judging whether a project creates value.

The blended cost of a company's debt and equity, weighted by their shares in the capital structure and computed after adjusting debt cost for the tax shield.

The mix of debt and equity a company uses to fund its assets, which influences financial risk, interest cost and the overall cost of capital.

A leverage measure comparing total borrowings with shareholders' funds, showing how much of the business is financed by debt relative to owners' capital.

Earnings before interest and tax divided by interest expense, indicating how comfortably operating profit can absorb the interest burden on borrowings.

The level of sales or output at which total revenue equals total cost, so contribution exactly covers fixed costs and profit is zero.

Sales revenue minus variable costs, representing the amount each unit or rupee of sales contributes toward covering fixed costs and then generating profit.