Here is Question No. 57 a part of our series on UPSC Prelims 2021.
Q57. Consider the following:
- Foreign currency convertible bonds.
- Foreign institutional investment with certain conditions
- Global depository receipts
- Non-resident external deposits
Which of the above can be included in Foreign Direct Investments?
a) 1, 2 and 3
b) 3 only
c) 2 and 4
d) 1 and 4
Answer: (a)
- 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, as amended from time to time.
- An Automatic Route for the Issue of Foreign Currency Convertible Bonds (FCCBs) is allowed. Foreign Portfolio Investment is any investment made by a person resident outside India in capital instruments where such investment is (a) less than 10 percent of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid-up value of each series of capital instruments of a listed Indian company. It is the percentage that defines whether it is a direct or institutional investment.
- 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 that are listed, traded and settled overseas.
- Statement 4 is incorrect: A Non-Resident An external (NRE) account is a rupee-dominated account opened by an NRI to facilitate deposit of foreign currency earnings. It is not an FDI
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