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Kerala PSC Indian Economy Book Study Materials Page 585Book's First Page
onomi on epts and erminolo ies 22.19 the conditions precedent to initial drawing of debt externAlities is satisfied. Factors that are not included in the gross income In a Public Private Partnership (PPP) project, of the economy but have an effect on human financial closure indicates the commencement welfare. They may be positive or negative–training of the Concession Period—the date on which personnel is an example of the former while financial closure is achieved is the appointed date pollution falls in the latter. which is deemed to be the date of commencement of concession period. In order to give a uniform fccb interpretation to the term, the RBI has provided a definition for ‘Greenfield’ projects, financial Foreign Currency Convertible Bond, (FCCB) closure is “a legally binding commitment of equity is an unsecured instrument to raise long-term holders and debt financiers to provide or mobilise loan in foreign currency by an Indian company funding for the project. Such funding must account which converts into shares of the company on a for a significant part of the project cost which should predetermined rate. It is counted as the part of not be less than 90 per cent of the total project cost external debt. It is a safer route to raise foreign securing the construction of the facility”. currency requirements of a company. feDerAl funD rAte finAnciAl stAbility boArD (fsb) The Financial Stability Forum (FSF) was The federal fund rate (also popular as Fed Fund established by the G7 finance ministers and central Rate or Fed Rate) is the rate that interest banks charge each other on overnight loans in the USA. bank governors in 1999 to promote international The rate is fixed by the US central bank Federal financial stability through enhanced information Reserve. This is equivalent to the Repo rate of India exchange and international cooperation in which is fixed by the RBI. financial market supervision and surveillance. It decided at its plenary meeting in London on March In wake of the sub-prime real estate crisis 2009 to broaden its membership by inviting the wrecking havoc on the US economy, the Fed new members from the G20 countries, namely, Rate has been cut time and again to counter the Argentina, Brazil, China, India, Indonesia, Korea, possible future recession. Mexico, Russia, Saudi Arabia, South Africa, and Turkey. The FSF was relaunched as the Financial fiDuciAry issue Stability Board (FSB) on April 2, 2009, in order Issuance of currency by the government not to mark a change and convey that the FSF in matched by gold securities, also known as fiat future would play a more prominent role in this money. direction. finAnciAl closure fiscAl DrAg Financial closure is defined as a stage when all The restraining effect of the progressive taxation the conditions of a financing agreement are economies feel on their expansion—fall in the fulfilled prior to the initial availability of funds. total demand in the economy due to people It is attained when all the tie ups with banks or moving from lower to higher tax brackets and financial institutions for funds are made and all the government tax receipts go on increasing.