. 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?

[UPSC Civil Services Exam – 2021 Prelims]

(a) 1, 2 and 3 only

(b) 3 only

(c) 2 and 4 only

(d) 1 and 4 only

Answer: (a)        

Explanation:

• Statement 1, 2, and 3 are correct.
• A ‘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, with any subsequent amendments.
• The Automatic Route allows for the issuance of Foreign Currency Convertible Bonds (FCCBs) without requiring prior approval from regulatory authorities.
• Foreign Portfolio Investment refers to investments made by non-residents in capital instruments of listed Indian companies, where the investment is less than 10 percent of the post-issue paid-up equity capital on a fully diluted basis, or less than 10 percent of the paid-up value of each series of capital instruments.
• Statement 4 is incorrect. The percentage of investment does not determine whether it is considered direct or institutional investment.