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Global Depository Receipt (GDP) - International Finance, Interdisciplinary issues in Indian Commerce Video Lecture | Interdisciplinary Issues in Indian Commerce - B Com

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FAQs on Global Depository Receipt (GDP) - International Finance, Interdisciplinary issues in Indian Commerce Video Lecture - Interdisciplinary Issues in Indian Commerce - B Com

1. What is a Global Depository Receipt (GDR)?
Ans. A Global Depository Receipt (GDR) is a financial instrument that represents shares in a foreign company. It is issued by a foreign company outside the country where it operates and is traded on international stock exchanges. GDRs allow foreign companies to raise capital from international investors without directly listing their shares on local stock exchanges.
2. How does a Global Depository Receipt (GDR) work?
Ans. When a company decides to issue GDRs, it appoints a depository bank to manage the issuance and trading of these receipts. The depository bank holds the shares of the foreign company and issues GDRs against them. These GDRs are then listed on international stock exchanges, allowing investors to buy and sell them. The price of GDRs is usually based on the value of the underlying shares of the foreign company.
3. What are the advantages of investing in Global Depository Receipts (GDRs)?
Ans. Investing in GDRs offers several advantages. Firstly, it provides an opportunity for investors to diversify their portfolio by gaining exposure to foreign companies. Secondly, GDRs allow investors to invest in companies that may not be listed on their local stock exchanges. Additionally, GDRs provide a convenient way for international companies to raise capital globally without complying with the regulatory requirements of each country.
4. Are there any risks associated with investing in Global Depository Receipts (GDRs)?
Ans. Yes, there are risks associated with investing in GDRs. One of the main risks is currency risk, as the value of GDRs is often denominated in a foreign currency. Fluctuations in exchange rates can impact the returns on GDR investments. Additionally, investors should consider the political and economic stability of the country where the foreign company operates, as these factors can affect the company's performance and the value of its GDRs.
5. Can Indian investors invest in Global Depository Receipts (GDRs)?
Ans. Yes, Indian investors can invest in GDRs issued by foreign companies. However, they need to comply with the regulations set by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). Indian investors are allowed to remit up to a certain limit for investment in GDRs, subject to certain conditions. It is advisable for Indian investors to consult with their financial advisors and understand the regulatory requirements before investing in GDRs.
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