Financial Concepts and Institutions
Six Sigma
Definition
Six Sigma is a data-driven methodology used to improve business processes by reducing defects and errors, minimizing variation, and increasing quality and efficiency, aiming for near-perfect quality.
Purpose
Six Sigma focuses on identifying and eliminating the root causes of defects and variations in processes, ultimately leading to improved quality and customer satisfaction.
Origin
The term “Six Sigma” originated in manufacturing as a means of quality control, but it has since been adopted across various industries and functions.
Microfinance
Definition
Microfinance, also termed as microcredit, is a type of banking system or method in which banking services are provided to the unemployed or the poor who otherwise do not have access to any other source of income.
Purpose
Most micro-financial institutions provide banking credits to the humble, based people in the form of small credits, which are typically referred to as microloans. Microfinance is one step ahead in the direction of “Aatamnirbhar Bharat”, as it mainly aims to help the rural people and women from self-help groups attain self–sufficiency.
World Trade Organization (WTO)
Definition
The World Trade Organization (WTO) is a global organization that deals with the rules of trade between nations. It is made up of 164 member countries, and its goal is to ensure that trade flows as smoothly and predictably as possible.
Dispute Resolution
When a trade dispute occurs, the WTO works to resolve it. For example, if a country erects a trade barrier in the form of a customs duty against a particular country or a particular good, the WTO may issue trade sanctions against the violating country. The WTO will also work to resolve the conflict through negotiations.
Derivatives
Definition
Derivatives are financial contracts whose value is derived from an underlying asset, like stocks, bonds, currencies, or commodities, and are used for risk management, speculation, and hedging.
Underlying Assets
These can include stocks, bonds, currencies, commodities, interest rates, or even other derivatives.
Leverage
Derivatives are often leveraged instruments, meaning a small investment can control a larger position in the underlying asset, which can amplify both potential gains and losses.
Securities and Exchange Board of India (SEBI)
History
The Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory body for regulating the securities market. Before it came into existence, the Controller of Capital Issues was the market’s regulatory authority, and derived power from the Capital Issues (Control) Act, 1947. SEBI became an autonomous body on 30 January 1992 and was accorded statutory powers with the passing of the SEBI Act, 1992 by the Parliament of India.
Dematerialization
Definition
Dematerialization, in the context of finance, is the process of converting physical share certificates and securities into electronic form, stored in a Demat account, for easier and more secure trading and management.
Process
Dematerialization, often shortened to “Demat,” is the process of converting physical share certificates and other securities into electronic form. Investors open a Demat account with a Depository Participant (DP), who acts as an agent of a depository (like NSDL or CDSL).