Economics • Banking & FinanceHard
In the context of India's external debt management, what distinguishes 'External Commercial Borrowings' from portfolio investments?
A. External Commercial Borrowings represent commercial loans availed by eligible resident entities from recognized non-resident lenders subject to specific regulatory ceilings✓ Correct Answer
B. External Commercial Borrowings refer exclusively to equity shares purchased by foreign venture capitalists in domestic startup enterprises
C. External Commercial Borrowings denote sovereign grants extended by multilateral agencies like the World Bank for poverty alleviation
D. External Commercial Borrowings comprise short-term trade credits extended exclusively between central banks for foreign exchange balancing
💡 Solution & Explanation
External Commercial Borrowings are commercial loans raised by eligible resident corporate entities from non-resident lenders, conforming to parameters such as minimum maturity, permitted end-use, and all-in-cost ceilings. They form a key component of India's external debt portfolio and are regulated under the Foreign Exchange Management Act. Misclassifying them as portfolio investments ignores their debt-creating nature and fixed repayment schedules. The Reserve Bank of India oversees these borrowings to ensure sustainable capital account management.
More Economics Banking & Finance questions
- Under which statutory provision are scheduled commercial banks in India required to maintain the Statutory…
- What does the term 'Base Rate' signify in the Indian lending landscape before the adoption of MCLR?
- What is the primary objective of establishing Financial Literacy Centres by commercial banks across rural…
- What does 'Reverse Repo Rate' signify?
- Which of the following bodies in India is responsible for the regulation of chit funds?