Financial Education

Class IX
Investment
 Types of Investment
 Direct  The buying of shares on a stock market
Equity and holding by individual investors in
anticipation of dividends and capital gains
with changes in its value.

 Mutual  Professionally managed pools of money

Funds
from investors with similar investment
objectives.

 Insurance  Investments that protect you and your

family against an uncertain future.

 An investment with reliable and pre-

 Fixed
defined goal for its return.
Deposit
 Types of Investment (cont.)
 A fixed income bearing investment
 Bonds product in which an investor lends money
to a company or government in return of
interest.

 Gold  A traditionally favoured investment option

as a long term investment.

 Real  An investment option which generate an

Estate ongoing income source in the form of rent
and also can raise in value over time.
Financial Sector Reforms
and Insurance
IRDAI

 IRDAI stands for Insurance Regulatory and

Development Authority of India.

 It regulates insurance industry in India.

 IRDAI as a statutory body was set up in 1999.

 Major function of IRDAI includes protecting

the interests of the policyholders and
regulating, promoting and ensuring orderly
growth of insurance industry in India.
Source of funds
Classification of source of funds

 In case of proprietary and partnership

concerns, the funds may be raised either
from personal sources or borrowings from
banks, friends etc.

 In case of company form of organization, the

different sources of business finance
available may be categorized on different
basis viz., period, source of generation and
the ownership.
On the basis of Period
On the basis of Ownership
 Equity Shares

 A company divides its capital into shares.

 These are offered to investors to raise capital.

 The owner of equity shares are the owner of

the company in proportion to their
shareholding.

 Company may distribute its profit to

shareholders which is called dividend.

 Value of shares will increase and decrease

based on the performance of the company.
Preference Shares

 They are different categories of shares where

in preference share holders get preference
over equity share holders for payment of
dividend and payback of capital.

 They have to pay a fixed amount of dividend

to the investor in case of profit.
Debentures

 Issued to raise loan from investor at specific

rate of interest for the specific period.

 The company has to pay interest and repay

the amount invested after specific period.

 Debenture holders are not the owners of the

company.
 Loans from Financial Institutions
 Demand  The entire amount is paid to the debtor
Loan at one time, either in cash or by transfer
to his savings bank or current account.
 Term Loan  Generally granted for fixed capital
requirements, e.g. investment in plant
and equipment, land, flat and building
etc. Interest has to be paid at pre-
decided interest rate.
 Cash  A drawing account against credit
Credit granted by the bank and is operated in
same way as a current account in which
an overdraft limit has been sanctioned.
Usually granted against the security of
 Overdraft goods.
 It lets its account holders draw over and
above his own balance up to the extent
of the limit stipulated.
 Discountin 
Banks also advance funds by discounting
g of Bill bills of exchange.
Raising fund from Customers and Suppliers
PAN Card and Aadhaar
Card
 PAN and its Purpose

 Permanent Account Number (PAN) is a 10 digit

alphanumeric number issued by the Income Tax
Department.
 It enables the department to link all financial
transactions of the “person” and acts as its identifier
with the tax department.
 It is mandatory to quote PAN on return of income.
 It is also compulsory to quote PAN in all documents
pertaining to economic or financial transactions of
Direct Taxes.
 It is mandatory to mention PAN for obtaining a
telephone or cellular telephone connection.
 PAN has to be mentioned for making time deposit with
a bank/post office exceeding Rs.50,000/- or depositing
Rs.50,000/- or more in a Bank.
 Aadhaar and its Purpose

 It is a 12-digit unique number which the Unique

Identification Authority of India (UIDAI) will issue
to all residents in India. It stores basic
demographic and biometric information.
 It is easily verifiable.
 Unique and robust enough to eliminate the large
number of duplicate and fake identities in
government and private database.
 It is for every individual, including infants.
 Each individual will be given a single unique
Aadhaar ID number.
 It does not replace any other ID e.g. Passport,
ration card.
Benefits of Aadhaar

 Great potential for not-so-privileged, poor

and the marginalized people, mostly the
rural population.
 Clear and unchangeable proof of identity.
 Facilitate entry for poor and underprivileged
residents into the formal banking system.
 Opportunity to avail services provided by the
government and the private sector.
 Giving migrants mobility of identity.
 Financial inclusion with deeper penetration,
easy distribution and direct benefit transfer.
Grievance Redressal Mechanism in
Insurance
 Role of IRDAI in Grievance Redressal and
Channels of receiving Grievances

 Channels:
- Toll free number
- E-mail on the official mail
- Registering a complaint on IGMS
- Complaint through letter/courier.
 Role of IRDAI
- Facilitates registration of complaints against insurers.
- Facilitates resolution of complaints by insurers.
- Monitors timeliness of disposal.
- Takes up complaints on a sample basis for off-site
supervision.
- Uses MIS based on complaints for monitoring market
conduct and regulatory compliance.
Credit Cards and Debit
Cards
Samples

CREDIT CARD DEBIT CARD

 Credit Card Debit Card
 Issued by a financial  Issued by a bank which
institution, usually allows the holder access to
banks, giving the holder his account to withdraw
an option to buy goods cash or pay for goods and
and services without services.
making any actual cash  A type of plastic money
payment. which only allows access to
 A type of short-term ones own deposited
borrowing. money.
 The card holder has to  The card holder can go to
pay the money back to an ATM or pay
the bank within 30-50 electronically at merchant
days and an interest is locations. It thus removes
charged on late the need for cheques as it
payment. enables immediate
transfer and withdrawal of
cash.
 Advantages

Credit Card Debit Card

 Allows to make purchases  Easy and convenient
on credit . It allows you a withdrawal of funds.
lot of flexibility.
 Can be used
 accurate record-keeping. anywhere to pay for
your purchases.
 Convenient remote
purchasing.  No monthly interest
charged on
 No need to carry cash transactions.
while making purchase or
travelling.  Allows ATM access.
Natural Disasters
Protection against Natural Disasters

 General insurance policies provide financial

benefits which can help in overcoming post-
disaster financial shocks.
 Public Liability Insurance Act 1991 has made
it mandatory for all establishments handling
hazardous chemicals to provide
compensation to third party victims of
industrial accidents.
 Having insurance for crops as well as
livestock, helps in recovering the financial
loss post-disaster.
 RBI
Central Bank
Quick facts on RBI

 The apex monetary and banking institution in

India. India’s central bank.
 RBI is headed by it’s governor.
 RBI regulates the issue of bank notes, keep
reserves to secure monetary stability in India
and operate the currency and credit system
in the best interests of the country.
Functions of RBI

 Issue of Currency
 Banker to Government
 Banker to Banks
 Controller of credit and money supply
 Regulator and supervisor of banks
 Custodian of foreign exchange
 Regulator of payment and settlement system
 Maintenance of financial stability
 Developmental Role
Banks and Loans
Loan

 A sum of money
borrowed from a
financial institution is
called loan.
 A loan is repaid with
an interest.
 Interest is the extra
money we pay along
with the principal
amount borrowed.
 Banks accept deposits
from people and
lends them to people
for various purposes.
Types of Loans

 Loan availed for the purpose of buying a new

home is called home loan.
 Personal loans are meant to meet the
personal needs of an individual.
 Vehicle loan or car loan fulfills your dream of
having a car or a bike.
 Loan availed to pursue higher education is
called education loan.
 Gold loans can be availed from banks and
other financial institutions in exchange for
keeping physical gold as security.
Types of Loans (cont.)

 Various loans offered to cater the needs of

agricultural farmers are called agricultural
loans.
 A type of loan where banks allow their
customers to withdraw more money than
they have in their account is called an Over
Draft.
 Loan provided to either existing business or
those venturing into new business on the
basis of borrower’s credentials is called
business loan.
 Process of applying for a loan

 An application form for loan is provided by the

banks which should be filled correctly and the
type of loan you need should be mentioned
correctly.
 Credit history check is done by the bank to know
the credit worthiness of the borrower. CIBIL
(Credit Information Bureau India Limited) collects
and maintains the records of individual’s
payments pertaining to loans and credit cards.
 The customer need to produce their identity
proofs and other certificates to the bank.
 After reviewing all the submitted documents of
the borrower, banks may approve or reject the
loan application.
Inflation
What is Inflation

 Inflation can be defined as a persistent rise

in general prices of goods and services in an
economy.
 Mathematically, inflation is nothing but rate
of increase in price.
 It is measured by calculating the increase in
rate of a price index i.e. the WPI (Wholesale
Price Index) and the CPI (Consumer Price
Index).
 WPI is extensively used as a measure of
inflation in India.
Types of Inflation

 Inflation due to excess demand is called

Demand Pull Inflation.
Aggregate Demand > Aggregate Supply.
 Cost-push inflation occurs because of rise in
input prices i.e. rising costs.
 Supply-shock inflation relates to a
considerable increase in the cost of goods
and services that are considered to be
essential and somewhat difficult to
substitute. It involves a trickledown effect.
 Risk and Insurance

 The term risk means the chance of suffering loss due

to possibility of adverse events beyond control of
man.
 The events that give rise to risks are known as perils.
 The essences of the Insurance scheme is that it is a
-social science
-accumulation of funds
-involves a group of risks
-transfer of risk to the whole group.
 Insurance is an arrangement through which a person
can plan for the continuation of income when certain
events disrupt one’s ability to earn livelihood.
 Thank You
Email : info@ncfe.org.in
Call : 022 68265 115
Like : facebook.com/ncfeindia
Follow : twitter.com/ncfeindia
Share : youtube.com/ncfeindia