Category: Tidbits

Nudge Theory at work

Richard Thaler (Nobel Prize Laureate) and Cass Sunstein in their book “Nudge: Improving Decisions About Health, Wealth, and Happiness” define nudge as any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives. Essentially a nudge is a change in an individual’s environment making it more likely that the person will make a particular choice or behave in a particular way. Further, to count as a mere […]

Shoe Leather Cost, Covid & Yes Bank!

People normally want to park most of their liquidity in an interest bearing savings account with a bank (or park in liquid funds) and minimise the actual cash they keep with themselves. This is because while the nominal value of cash remains constant, the real value of the same reduces with time due to inflation. However, some amount of cash one needs, to carry on day to day activities – to pay to vegetable vendor, for grocery store next door […]

What is Commercial Paper ?

What is Commercial Paper? – CP is essentially an unsecured money market instrument issued in the form of a promissory note . It was formally introduced in Indian market in 1990 with the stated intent to enable “highly rated corporate borrowers to diversify their sources of short-term borrowings and also provide an additional financial instrument to investors”. Reserve Bank of India Act, 1934 gives RBI the authority to regulate all the money market instruments in India. RBI over the past […]

Why does RBI consider coins as Asset but notes as Liability!

If one goes through the balance sheet of RBI, one can observe that Notes issued by RBI come under the Liability section while “Coins” are classified as Assets. Seems confusing, right? Let’s explore the rationale behind this. The RBI Act,1934 gives Reserve Bank of India the sole right to issue bank notes in India. Section 34 of the act further stipulates that the Issue Department of RBI will have as liability an amount equal to the total of the amount […]

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