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CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Institutions

Under the Indian ECB framework, which of the following is an eligible lender (recognised lender) from whom an Indian company can ordinarily raise External Commercial Borrowings?

An eligible ECB lender is a recognised non-resident, such as a foreign bank, multilateral financial institution or foreign equity holder from a FATF-compliant jurisdiction. Resident Indian persons, institutions or schemes cannot be ECB lenders because ECB is borrowing from non-residents.

  1. AA resident individual in India
  2. BA resident of a FATF-compliant jurisdiction, such as a multilateral financial institution or foreign bankCorrect
  3. CA non-banking finance company registered only within India
  4. DAn Indian mutual fund scheme

Explanation

ECB must be raised from a recognised non-resident lender, such as a resident of a FATF or IOSCO-compliant jurisdiction, including multilateral and regional financial institutions, foreign banks and foreign equity holders. Resident Indian entities and individuals cannot lend as ECB lenders because ECB is by definition a foreign-currency or rupee-denominated borrowing from non-residents.

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