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.