Q. consider the following:
1. Foreign currency convertible bonds
2. Foreign 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?
Why this question) India sees growth of 10% (to $82 bn) in Foreign Direct Investment (FDI).
Exp) Option a is correct.
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.
Automatic Route for 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 which defines whether it is direct or institutional investment.
FII made above 10 percent of the post issue paid-up equity capital will be considered as 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.
Statement 4 is incorrect.
A Non-Resident External (NRE) account is a rupee dominated account opened by an NRI to facilitate deposit of foreign currency earnings. It is not an FDI.