Consider the following 1. Foreign Currency convertible bonds 2. Foriegn Institutional investment with certain conditions 3. Global depository receipts 4. Non-resident external deposits Which of the above can be included in Foreign Direct Investments?

QUESTION

Medium

Economy

Prelims 2021

Consider the following

Foreign Currency convertible bonds
Foriegn Institutional investment with certain conditions
Global depository receipts
Non-resident external deposits

Which of the above can be included in Foreign Direct Investments?

Select an option to attempt

Explanation

Statements 1, 2 and 3 are correct.

Foreign Currency Convertible Bond (FCCB) is a bond issued under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.

Foreign Portfolio Investment is any investment made by a person resident outside India in capital instruments. It is the percentage which defines whether it is a direct or institutional investment.

FII made above 10 per cent of the post-issue paid-up equity capital will be considered FDI. But Once an FDI always an FDI.

Foreign investment in Indian securities has been made possible through the purchase of Global Depository Receipts, Foreign Currency Convertible Bonds and Foreign Currency Bonds issued by Indian issuers which are listed, traded and settled overseas.

A Non-Resident External (NRE) account is a rupee-dominated account opened by an NRI to facilitate the deposit of foreign currency earnings. It is not an FDI. Hence, statement 4 is incorrect.

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