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With reference to Depositary Receipts (DRs), consider the following statements:
These can only be issued by the Foreign Portfolio Investors.
These are an instrument to facilitate investment in shares of foreign companies.
It removes the need for a company to be listed on any stock exchange in the world.
Which of the statements given above is/ are correct?
- a)1 and 2 only
- b)2 only
- c)2 and 3 only
- d)1 and 3 only
Correct answer is option 'B'. Can you explain this answer?
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With reference to Depositary Receipts (DRs), consider the following s...
Answer:
Introduction:
Depositary Receipts (DRs) are financial instruments that represent shares of a foreign company. They are issued by a domestic bank or financial institution in a different country, allowing investors in that country to hold shares of foreign companies without directly owning the underlying securities. DRs are commonly used to facilitate investment in shares of foreign companies and provide a way for investors to diversify their portfolios internationally.
Explanation:
The given statements about Depositary Receipts (DRs) are as follows:
Statement 1: These can only be issued by Foreign Portfolio Investors.
This statement is incorrect. Depositary Receipts (DRs) can be issued by both Foreign Portfolio Investors (FPIs) and domestic banks or financial institutions. FPIs, which include foreign institutional investors, mutual funds, and other qualified foreign investors, are allowed to invest in DRs issued by foreign companies listed on Indian stock exchanges. However, domestic banks or financial institutions can also issue DRs to facilitate investment in shares of foreign companies by domestic investors.
Statement 2: These are an instrument to facilitate investment in shares of foreign companies.
This statement is correct. Depositary Receipts (DRs) are indeed a financial instrument that allows investors to invest in shares of foreign companies. DRs represent ownership of underlying shares and allow investors to benefit from the performance of those shares without directly owning them. This facilitates investment in foreign companies, providing investors with exposure to international markets and the opportunity to diversify their portfolios.
Statement 3: It removes the need for a company to be listed on any stock exchange in the world.
This statement is incorrect. Depositary Receipts (DRs) do not eliminate the need for a company to be listed on a stock exchange. In fact, for DRs to be issued, the underlying shares of the foreign company must be listed on a recognized stock exchange. The DRs are created based on these listed shares, and investors can trade the DRs on domestic exchanges, providing them with access to the foreign company's shares even if the company is not listed on the domestic exchange.
Therefore, the correct answer is option 'B' - Statement 2 only. Depositary Receipts (DRs) are indeed an instrument to facilitate investment in shares of foreign companies, but they can be issued by both Foreign Portfolio Investors and domestic banks or financial institutions. Additionally, DRs do not eliminate the need for a company to be listed on a stock exchange; rather, they provide a means for investors to access the shares of listed foreign companies.
Introduction:
Depositary Receipts (DRs) are financial instruments that represent shares of a foreign company. They are issued by a domestic bank or financial institution in a different country, allowing investors in that country to hold shares of foreign companies without directly owning the underlying securities. DRs are commonly used to facilitate investment in shares of foreign companies and provide a way for investors to diversify their portfolios internationally.
Explanation:
The given statements about Depositary Receipts (DRs) are as follows:
Statement 1: These can only be issued by Foreign Portfolio Investors.
This statement is incorrect. Depositary Receipts (DRs) can be issued by both Foreign Portfolio Investors (FPIs) and domestic banks or financial institutions. FPIs, which include foreign institutional investors, mutual funds, and other qualified foreign investors, are allowed to invest in DRs issued by foreign companies listed on Indian stock exchanges. However, domestic banks or financial institutions can also issue DRs to facilitate investment in shares of foreign companies by domestic investors.
Statement 2: These are an instrument to facilitate investment in shares of foreign companies.
This statement is correct. Depositary Receipts (DRs) are indeed a financial instrument that allows investors to invest in shares of foreign companies. DRs represent ownership of underlying shares and allow investors to benefit from the performance of those shares without directly owning them. This facilitates investment in foreign companies, providing investors with exposure to international markets and the opportunity to diversify their portfolios.
Statement 3: It removes the need for a company to be listed on any stock exchange in the world.
This statement is incorrect. Depositary Receipts (DRs) do not eliminate the need for a company to be listed on a stock exchange. In fact, for DRs to be issued, the underlying shares of the foreign company must be listed on a recognized stock exchange. The DRs are created based on these listed shares, and investors can trade the DRs on domestic exchanges, providing them with access to the foreign company's shares even if the company is not listed on the domestic exchange.
Therefore, the correct answer is option 'B' - Statement 2 only. Depositary Receipts (DRs) are indeed an instrument to facilitate investment in shares of foreign companies, but they can be issued by both Foreign Portfolio Investors and domestic banks or financial institutions. Additionally, DRs do not eliminate the need for a company to be listed on a stock exchange; rather, they provide a means for investors to access the shares of listed foreign companies.
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With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer?
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With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer?.
With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to Depositary Receipts (DRs), consider the following statements: These can only be issued by the Foreign Portfolio Investors. These are an instrument to facilitate investment in shares of foreign companies. It removes the need for a company to be listed on any stock exchange in the world. Which of the statements given above is/ are correct?a)1 and 2 onlyb)2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'B'. Can you explain this answer?.
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