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With reference to Depository Receipts (DRs), consider the following statements:
DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company.
Indian investors can purchase securities of global companies through American Depository Receipts.
In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI).
Which of the statements given above is/are correct?
- a)1 only
- b)2 and 3 only
- c)1 and 3 only
- d)1, 2 and 3
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
With reference to Depository Receipts (DRs), consider the following s...
- Depository Receipts or DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. These receipts are issued by a bank and are traded on a local stock exchange. Here, it is important to note that the actual foreign company is neither listed nor traded on the exchange. The underlying shares would be held by another custodian bank in the home country of the company issuing the depository receipts. Hence, statement 1 is correct.
- DRs constitute an important mechanism through which issuers can raise funds outside their home jurisdiction. DRs are issued for tapping foreign investors who otherwise may not be able to participate directly in the domestic market.
- Depending on the location in which these receipts are issued they are called as ADRs or American Depository Receipts (if they are issued in USA on the basis of the shares/securities of the domestic (say Indian) company), IDR or Indian Depository Receipts (if they are issued in India on the basis of the shares/securities of the foreign company; Standard Chartered issued the first IDR in India) or in general as GDR or Global Depository Receipt.
- Thus, ADR or GDR are issued outside India by a foreign depository on the back of an Indian security deposited with a domestic Indian custodian in India (means a custodian or keeper of securities- an Indian depository, a depository participant, or a bank- and having permission from the securities market regulator, SEBI, to provide services as custodian).
- The American Depository Receipts or ADRs allowed American investors to purchase securities issued by companies outside the US. Similarly, Indian investors can purchase securities of global companies through Indian Depository Receipts (IDRs). Hence, statement 2 is not correct.
- In India any company - whether private limited or public limited or listed or unlisted - can issue DRs. However, listed DRs enjoy some tax benefits. ADR /GDR issues based on shares of a company are considered as part of Foreign Direct Investment (FDI) in India, though it is an indirect way of holding shares. Hence, statement 3 is correct.
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With reference to Depository Receipts (DRs), consider the following s...
Depository Receipts (DRs) are negotiable financial instruments that represent the publicly traded securities of a foreign company. They are issued by a depository bank in one country to investors in another country, allowing investors to hold securities of foreign companies without actually owning the underlying shares. DRs are traded on a local stock exchange and denominated in the local currency.
Statement 1: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company.
This statement is correct. DRs represent the ownership of shares in a foreign company and are traded on a stock exchange. They allow investors to diversify their portfolio by investing in foreign companies without the need for direct ownership.
Statement 2: Indian investors can purchase securities of global companies through American Depository Receipts.
This statement is incorrect. American Depository Receipts (ADRs) are a specific type of DRs that represent the shares of a foreign company traded on a US stock exchange. Indian investors can purchase ADRs of global companies listed on US exchanges, but they cannot directly purchase securities of global companies through ADRs.
Statement 3: In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI).
This statement is correct. In India, Global Depository Receipts (GDRs) are issued by Indian companies to raise funds from global investors. GDRs are considered as a form of Foreign Direct Investment (FDI) because they represent ownership of shares in an Indian company by foreign investors.
Therefore, the correct answer is option C: 1 and 3 only. DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company, and in India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI).
Statement 1: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company.
This statement is correct. DRs represent the ownership of shares in a foreign company and are traded on a stock exchange. They allow investors to diversify their portfolio by investing in foreign companies without the need for direct ownership.
Statement 2: Indian investors can purchase securities of global companies through American Depository Receipts.
This statement is incorrect. American Depository Receipts (ADRs) are a specific type of DRs that represent the shares of a foreign company traded on a US stock exchange. Indian investors can purchase ADRs of global companies listed on US exchanges, but they cannot directly purchase securities of global companies through ADRs.
Statement 3: In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI).
This statement is correct. In India, Global Depository Receipts (GDRs) are issued by Indian companies to raise funds from global investors. GDRs are considered as a form of Foreign Direct Investment (FDI) because they represent ownership of shares in an Indian company by foreign investors.
Therefore, the correct answer is option C: 1 and 3 only. DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company, and in India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI).
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With reference to Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. Can you explain this answer?
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With reference to Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. 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 Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. 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 Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. Can you explain this answer?.
With reference to Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. 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 Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. 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 Depository Receipts (DRs), consider the following statements: DRs are negotiable financial instruments that represent the publicly traded securities of a foreign company. Indian investors can purchase securities of global companies through American Depository Receipts. In India, Global Depository Receipts issues based on shares of a company are considered as part of Foreign Direct Investment (FDI). Which of the statements given above is/are correct?a)1 onlyb)2 and 3 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'C'. Can you explain this answer?.
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