Financial Literacy Guidebook 2025 – Vocabulary Flashcards

Vocabulary flashcards covering fundamental terms from the Financial Literacy Guidebook 2025, designed to reinforce key concepts in money, banking, investing, and personal finance.

Money

A universally accepted medium of exchange that serves as a unit of account, store of value, and standard of deferred payment.

Barter System

A system of exchange where goods and services are traded directly without the use of money.

Commodity Money

Early form of money made from items with intrinsic value such as shells, salt, or grain.

Fiat Money

Government-issued currency not backed by a physical commodity but by public trust in the issuing authority.

Cryptocurrency

A digital, decentralised currency secured by cryptography and typically based on blockchain technology.

Central Bank Digital Currency (CBDC)

A government-backed digital form of a nation’s fiat currency, issued and controlled by the central bank.

Central Bank

The nation’s apex monetary authority that issues currency, manages the money supply, and supervises the banking system.

Commercial Bank

A profit-oriented financial institution that accepts deposits, provides loans, and offers payment services to the public.

Repo Rate

The interest rate at which a central bank lends short-term funds to commercial banks.

Reverse Repo Rate

The rate at which a central bank borrows funds from commercial banks, absorbing excess liquidity.

Cash Reserve Ratio (CRR)

The percentage of a bank’s total deposits that must be kept as cash reserves with the central bank.

Statutory Liquidity Ratio (SLR)

The percentage of deposits banks must maintain in liquid assets like cash, gold, or government securities.

Demand for Money

The desire of households and firms to hold cash or bank deposits for transactions, precaution, or speculation.

Money Supply

The total quantity of money—currency plus deposits—available in an economy at a given time.

Fixed Exchange Rate

A currency regime in which the government or central bank pegs its currency’s value to another currency or basket.

Floating Exchange Rate

A currency system where the value is determined by market demand and supply without direct government control.

Inflation

A sustained rise in the general price level of goods and services, reducing money’s purchasing power.

Interest Rate

The cost of borrowing money or the return on savings, expressed as a percentage of the principal.

UPI (Unified Payments Interface)

India’s real-time payment system that enables instant bank-to-bank transfers via mobile devices.

UPI Lite

An offline-capable UPI wallet that allows small-value transactions (≤ ₹500) without internet connectivity.

RTGS (Real-Time Gross Settlement)

A high-value payment system where funds transfer individually and immediately, minimum ₹2 lakh.

NEFT (National Electronic Funds Transfer)

A batch-processed electronic fund transfer system for any amount, settled every half hour.

IMPS (Immediate Payment Service)

A 24×7 instant interbank electronic funds transfer system with a limit up to ₹5 lakh per transaction.

SWIFT

A global messaging network used by banks to securely transmit information and instructions for international transfers.

Digital Wallet (E-wallet)

A secure electronic system that stores payment information and enables quick online or in-store transactions.

Loan EMI (Equated Monthly Instalment)

A fixed monthly payment comprising principal and interest, used to repay a loan over its tenure.

Credit Score

A numerical representation of an individual’s creditworthiness based on past borrowing and repayment history.

Stock (Equity Share)

A security representing ownership in a company, giving the holder voting rights and potential dividends.

Preference Share

A stock class offering fixed dividends and priority over common shares in dividend payment and liquidation.

Capital Gain

Profit earned when an asset, such as a stock or property, is sold for more than its purchase price.

Dividend

A portion of a company’s profit distributed to shareholders, usually expressed per share.

Bond

A fixed-income security representing a loan made by an investor to a borrower, with periodic interest (coupon) payments.

Coupon Rate

The annual interest rate paid on a bond’s face value to the bondholder.

Face Value (Par Value)

The principal amount of a bond that is repaid at maturity; also the nominal value of a share.

Yield

The effective return on a bond calculated as annual coupon divided by its current market price.

Market Capitalisation

The total market value of a company’s outstanding shares, calculated as share price × number of shares.

Initial Public Offering (IPO)

The first sale of a company’s shares to the public, leading to its listing on a stock exchange.

Demat Account

An electronic account that holds an investor’s securities in digital form, eliminating physical certificates.

Mutual Fund

An investment vehicle that pools money from many investors to buy a diversified portfolio managed by professionals.

Expense Ratio

The annual fee expressed as a percentage of assets that a mutual fund charges its investors.

Exit Load

A fee charged by some mutual funds when units are redeemed before a specified holding period.

Exchange-Traded Fund (ETF)

A fund that tracks an index, commodity, or basket of assets and is traded on stock exchanges like a share.

Hybrid Mutual Fund

A mutual fund that invests in a mix of equity and debt instruments to balance risk and return.

Portfolio Diversification

The practice of spreading investments across various assets to reduce overall risk and volatility.

Risk

The possibility of losing some or all of an investment or earning less than expected.

Return

The gain or loss on an investment over a period, expressed as a percentage of the initial amount.

Volatility

The degree of price fluctuation of an asset over time; higher volatility indicates higher risk.

100-Age Rule

A guideline suggesting the equity percentage in a portfolio should equal 100 minus the investor’s age.

Systematic Withdrawal Plan (SWP)

A mutual-fund feature allowing investors to withdraw a fixed amount at regular intervals.

Inflation-Indexed Bond

A bond whose principal and interest payments adjust with inflation, preserving purchasing power.

Hyperinflation

Extremely rapid and out-of-control price increases, eroding a currency’s value, e.g., Zimbabwe 2008.

Financial Fraud (Phishing)

A scam where fraudsters impersonate trusted entities to trick victims into revealing sensitive information.