Credit risk
Market basicsThe risk that a borrower in a portfolio fails to pay.
In plain terms
Sudden and usually permanent. This is the risk that has caused real Indian debt fund accidents.
1492 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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G-Sec
Market basicsAlso called: Government security
A government security — a bond issued by the central government, carrying effectively no credit risk and the full interest-rate risk of its maturity.
In plain terms
Sovereign does not mean the price cannot fall. A long-duration gilt fund can post a real loss through a rate-hiking cycle while every borrower repays in full.
Corporate FD
Market basicsA fixed deposit with a company rather than a bank.
In plain terms
One to two percent more, and no deposit insurance. The extra is the price of credit risk.
Debt fund
Market basicsA mutual fund investing in bonds and other fixed-income instruments.
In plain terms
Not an FD with better returns. It carries credit risk and duration risk, which behave completely differently.
Deposit-taking NBFC
Market basicsAlso called: NBFC-D, Deposit-taking non-banking financial company
A finance company specifically authorised by the Reserve Bank to accept public deposits, subject to rating and tenure conditions.
In plain terms
Most non-banking financial companies may not take public deposits at all; the deposit-taking category is a separately authorised, and shrinking, subset. Regulated, but not a bank and not insured — the extra rate is credit risk on one company with no safety net behind it.