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IIBF | JAIIB | PPB NOTES CHAPTER – 4: CAPITAL MARKET

IIBF JAIIB FREE Principles and Practices of Banking Notes Chapter – 4: CAPITAL MARKET

 

In this PPB short note for the MAY 2024 Exams, we are going to provide the important topics from Chapter 4 of the PPB MAY EXAM 2024 as per the prescribed JAIIB syllabus MAY 2024. And if you are also among the JAIIB Candidates who are going to write this JAIIB PPB MAY Exam 2024, then you must cover the Capital Market topic of Principles & practices of Banking paper at least.

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Then you will find the PPB’s Latest applicable Study Material for the MAY 2024 Attempt at the end of this article.

Short Notes on PPB Chapter – 4: CAPITAL MARKET

CAPITAL MARKET: It is a market where securities such as Shares, Bonds & Debentures are traded i.e. purchased and sold. While shares (Both Equity as well as Preference) are dealt in Equity Market while Debentures & Bonds are dealt with in the Debt MarketSEBI is regulator of Capital Market. The capital Market has been categorized into 2 types:

  1. PRIMARY MARKET: The market where the securities are sold by the Company directly under Public issue (IPO) or private placement is called as Primary Market.
  2. SECONDARY MARKET: The market where securities are traded through the Stock Exchanges is called a Secondary Market. For companies that are listed in Stock Exchange(s) & the sale is made through auction. It also includes OTC (Over Counter market) through which Futures of securities are dealt with through dealers.

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Read Also:- IIBF PPB STUDY MATERIAL 2024 – PRINCIPLES AND PRACTICES OF BANKING

Below is some of the information that is available in regard to the capital market which you must keep in your mind as a current update in regard to the capital market:

TERMS DETAILS
Stock Exchanges There are currently 9 Stock Exchanges in India, namely:

1.    BSE Ltd.

2.    India International Exchange (India INX)

3.    National Stock Exchange of India Ltd.

4.    Indian Commodity Exchange Limited

5.    Calcutta Stock Exchange Ltd.

6.    Multi Commodity Exchange of India Ltd.

7.    Metropolitan Stock Exchange of India Ltd.

8.    National Commodity & Derivatives Exchange Ltd.

9.    NSE IFSC Ltd.

National Stock Exchange, in short NSE, was started in year 1992 by banks and Financial Institutions.

What is Sensex 30?

It is Sensitive Index that has been launched by BSE which is market capitalization-weighted index of 30 Stocks (Shares) that represents large & sound Indian Companies (the 30 companies get updated on a quarterly basis)

What is Nifty 50?

It is Sensitive Index that has been launched by NSE which is market capitalization weighted index of 50 Stocks (Shares) representing large and sound Indian Co’s.

Shares, Debentures & Bonds
 Equity Share Preference Share
It is a part of permanent capital (Tier-I Capital) and cannot be redeemed. It might or might not be redeemable. But if redeemable, it forms part of Tier-II Capital
Dividend to equity holders is paid out of profits after making payment of dividend to Preference Shareholders. Preference shares are given preference while paying dividends. Any unpaid dividend can be carried forward depending on the type whether they are Cumulative Preference shares or not.
The Company, if liquidated, pays the share of equity dues at last. Preference Shares are given preference over the equity shares for payment of their dues at the time of liquidation
Equity carry Voting Rights. Preference shares don’t carry Voting rights in matters which don’t affect them.

IPO: It is an initial public offer by the Company through which it invites public to subscribe for shares.

FPO: It is called as Further public offer where an offer is made to subscribe for the same class of shares.

Right Issue: It means an Offer of shares made to the existing shareholders for purchase at a price for the same class of share that has already been issued.

Bonus Share: It is the type of share that is issued to existing shareholders without receiving their price i.e. free of cost.

Preference Shares: The preference share owners are entitled to fixed dividends on their preference shares (if they are cumulative). Dividend is paid to them first. They also get priority over Equity shares in repayment of their dues at liquidation time. Preference Shares are of following types:

1.    Cumulative & Non-Cumulative Preference Shares

2.    Redeemable & non-redeemable Preference Shares

3.    Participating & non-participating Preference Shares

4.    Convertible & non-convertible Preference Shares

Debentures and Bonds Debentures and Bonds are the constituents of the Debt Market.

Debenture Bond
Debentures are issued by Corporates (Private sector) Bonds are issued by government institutions (Public sector)
They are Secured by a Floating charge on the current assets. Bonds are not secured on any asset
Provisions of Co. Law are applicable on debentures Bonds are governed by the Indian Contract Act
They can be transferred by the registration process Bonds are negotiable instruments.
  • Debentures can be of both types:
  • convertible
  • non-convertible
Bonds, if given an option, are eligible to get converted into equity shares.
Bonds can be of the following natures:

  • Zero Coupon Bond
  • Perpetual Bond
  • Floating Bond
  • Deep Discount
Commercial Papers & Certificates of Deposit Commercial Papers (CPs):

  • CPs are issued by Corporates that are highly rated having Net Worth = or < 4 Crore,
  • CPs are issued with tenure 15 Days to 1 year.
  • CPs are issued in multiples of Rs. 5 lacs.
  • CPs are Promissory Notes and are Negotiable instruments thereby also attracting Stamp Duty.
  • CPs are fairly active in the Secondary markets.
  • CPs are traded in Demat form and their price < Face Value.

Certificate of Deposit (CD):

  • CDs are issued by banks
  • CDs are issued with tenure 7 Days to 1 year.
  • CDs are issued in multiples of Rs. 1 lac.
  • CDs are Promissory Notes like CPs and are Negotiable and thus, attract Stamp Duty.
  • Though CDs are not very active in Secondary market

 

LATEST JAIIB EXAM STUDY MATERIAL FOR MAY 2024

Learning Sessions provides the IIBF JAIIB Study material for all the 3 papers of JAIIB i.e. Principles & Practices of Banking, Accounting & Finance for Bankers & Legal & Regulatory Aspects of Banking etc. The material is as per the latest syllabus prescribed for JAIIB MAY 2024 Exams.

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Read Also:- IIBF JAIIB PPB QUESTION PDF – principles and practices of banking

 

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