SSC Economics Sample Paper NCERT Sample Paper-3

  • question_answer
    Through which one of the following source(s), Indian companies are allowed to access funds from abroad?
    (1) External Commercial Borrowings (ECB) only
    (2) Foreign Currency Convertible Bonds (FCCBs) Foreign Currency Exchangeable Bonds only
    (3) Preference Shares only

    A)  Only 1 

    B)  only 2

    C)  All 1, 2 & 3      

    D)  only 1 & 3

    Correct Answer: C

    Solution :

    [c] FEMA guidelines provide Indian companies to access funds from abroad by following methods:-[a] External Commercial Borrowings (ECB):- It refers to commercial loans in the form of bank loans, buyers' credit, suppliers' credit, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares) availed of from non- resident lenders with a minimum average maturity of 3 years. [b] Foreign Currency Convertible Bonds (FCCBs):- It refers to a bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency, [c] Preference shares- (i.e. non-convertible, optionally convertible or partially convertible). These instruments are considered as debt and denominated in Rupees and rupee interest rate will be based on the swap equivalent of LIBOR plus spread, [d] Foreign Currency Exchangeable Bond (FCEB):- FCEB is a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB may be Denominated in .my freely convertible foreign currency,

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