onomi on epts and erminolo ies 22.29
with the RBI for short-term periods (i.e., less than conditions for international funds and are widely
one year which is usually from one day to seven used by the banks as a basis for determining the
days, in practice), known as the Reverse Reop. On interest rates charged on the US dollar and foreign
such deposits to the RBI, the banks get an interest currency loans to the business customers.
rate of 6 per cent per annum at present.
An idea which states that current consumption
A curve devised by the economist Arthur Laffer is not dependent solely on current disposable
in 1974 which links average tax rates to total tax income of the consumers but is related to their
revenue. It suggests that higher tax rates initially anticipated lifetime income. This hypothesis has
increase revenue but after a point further increases its high applied value in the real life economic
in tax rates cause revenue to fall (for instance management.
by discouraging people from working). But it is
tough to know whether an economy is on the life insurAnce: some importAnt
Laffer curve, as higher taxation breeds evasion of terms
Insurance policies where a lump sum is payable
A term associated with the financial world which either at the end of the policy term or if the
created news after the US financial system was hit insured dies during the policy tenure, are termed
by the subprime crisis in mid-2007. as endowment policies.
These are the loans wherein borrowers
fraudulently mis-state their incomes often egged beneficiAry
on by the lender or broker to the bank. Such A person or organisation legally entitled to receive
frauds have been detected along the entire US benefits.
mortgage financing chain by September 2007–
websites freely advertised that for a nominal fee, term life insurAnce
they could produce sufficient proof of income by In most cases, term life insurance refers to a
generating bank statements, pay slips, income tax product that provides death benefit protection
returns, and provide references. Lenders in turn for a specified period of time, say for 30 years.
lied about the real terms and conditions of the Benefits are doled out under this scheme only if
loans to borrowers and lied about the quality of
the insured dies during the term.
loans sold to investors. The whole gamut of these
deeds make such mortgage loans the ‘liar loans’. Whole life insurAnce
It is a policy that provides insurance coverage for
the entire life of the individual for a fixed premium
The London Interbank Offered Rate (LIBOR) throughout his life insurance, coupled with an
is the interest rate on dollar and other foreign investment component. Investments could be
currency deposits at which larger banks are made in stocks or bonds that lead to accumulation
prepared to borrow and lend these currencies in of cash values. The augmented cash reserves are
the Euro-currency market. The rate reflects market returned once one decides to surrender the policy.