Module: | MODULE A: INTERNATIONAL BANKING
Q149: Consider the following statements regarding eligible borrowers and recognized lenders for offshore debt:
Statement 1. The 2026 framework expands eligibility to include any person resident in India, other than an individual, who is established under a Central or State Act and permitted to borrow.
Statement 2. The category of recognized lenders is restricted exclusively to foreign governments and multilateral financial institutions.
Statement 3. Foreign branches of Indian banks are permitted to act as recognized lenders for foreign currency-denominated loans, but are prohibited from lending in Indian Rupees under this framework.
Which of the above statements is/are correct?
Statement 2. The category of recognized lenders is restricted exclusively to foreign governments and multilateral financial institutions.
Statement 3. Foreign branches of Indian banks are permitted to act as recognized lenders for foreign currency-denominated loans, but are prohibited from lending in Indian Rupees under this framework.
Which of the above statements is/are correct?
✅ Correct Answer: C
The correct combination is Statement 1 and 3. The eligibility framework defines which Indian entities can raise offshore debt and which foreign entities can provide it.
Under the 2026 overhaul, borrower eligibility was significantly broadened.
Structurally, any non-individual person resident in India, established under a formal legislative act and otherwise permitted to incur debt, can now access these borrowings.
The recognized lender pool is equally broad, encompassing any person resident outside India, including institutional channels and credit funds, provided they meet standard regulatory compliance.
It is not restricted to governments or multilateral institutions.
A critical structural rule that remains intact is that foreign branches or subsidiaries of Indian banks can only lend in foreign currency; they are expressly prohibited from lending in Indian Rupees to prevent circular flow of domestic currency and exchange rate manipulation.
Historically, borrower eligibility was confined to a rigid list of entities eligible for Foreign Direct Investment, Non-Banking Financial Companies, and specific trusts.
The expansion was driven by the government's intent to democratize access to global capital for a wider array of operating businesses and investment holding vehicles.
Under the 2026 overhaul, borrower eligibility was significantly broadened.
Structurally, any non-individual person resident in India, established under a formal legislative act and otherwise permitted to incur debt, can now access these borrowings.
The recognized lender pool is equally broad, encompassing any person resident outside India, including institutional channels and credit funds, provided they meet standard regulatory compliance.
It is not restricted to governments or multilateral institutions.
A critical structural rule that remains intact is that foreign branches or subsidiaries of Indian banks can only lend in foreign currency; they are expressly prohibited from lending in Indian Rupees to prevent circular flow of domestic currency and exchange rate manipulation.
Historically, borrower eligibility was confined to a rigid list of entities eligible for Foreign Direct Investment, Non-Banking Financial Companies, and specific trusts.
The expansion was driven by the government's intent to democratize access to global capital for a wider array of operating businesses and investment holding vehicles.