Module: | MODULE A: INTERNATIONAL BANKING
Q151: Consider the following statements regarding the parking and deployment of offshore borrowing proceeds:
Statement 1. The 2026 framework permits borrowers to passively park their borrowed funds in offshore treasury accounts indefinitely to capitalize on interest rate arbitrage.
Statement 2. Funds raised for domestic Rupee expenditure must be repatriated to India immediately and credited to a Rupee account with an Authorised Dealer bank.
Statement 3. Pending deployment, repatriated funds can be temporarily held in fixed deposits with an Authorised Dealer bank in India for a maximum period of 12 months.
Which of the above statements is/are INCORRECT?
Statement 2. Funds raised for domestic Rupee expenditure must be repatriated to India immediately and credited to a Rupee account with an Authorised Dealer bank.
Statement 3. Pending deployment, repatriated funds can be temporarily held in fixed deposits with an Authorised Dealer bank in India for a maximum period of 12 months.
Which of the above statements is/are INCORRECT?
✅ Correct Answer: A
The incorrect statement is Statement 1. The parking of proceeds refers to where and how a borrower holds the borrowed funds before they are utilized for their stated end-use.
The 2026 regulations enforce strict treasury management protocols to prevent speculative capital holding.
Structurally, any funds raised for domestic expenditure in Indian Rupees must be repatriated to India immediately upon drawdown and credited to an onshore account.
The regulations strictly prohibit the indefinite parking of funds offshore for carry trade or passive yield generation.
While awaiting utilization, borrowers are permitted to hold the repatriated funds in onshore fixed deposits for a maximum duration of 12 months.
If the funds are intended for permissible foreign currency expenditure, they may be held in foreign currency accounts in India or in high-quality offshore deposits until use.
Historically, earlier frameworks offered slightly more flexibility in offshore parking, but the 2026 amendments tightened these rules to ensure tighter monitoring of capital flows and to guarantee that offshore debt is genuinely utilized for productive domestic economic activity rather than financial speculation.
The 2026 regulations enforce strict treasury management protocols to prevent speculative capital holding.
Structurally, any funds raised for domestic expenditure in Indian Rupees must be repatriated to India immediately upon drawdown and credited to an onshore account.
The regulations strictly prohibit the indefinite parking of funds offshore for carry trade or passive yield generation.
While awaiting utilization, borrowers are permitted to hold the repatriated funds in onshore fixed deposits for a maximum duration of 12 months.
If the funds are intended for permissible foreign currency expenditure, they may be held in foreign currency accounts in India or in high-quality offshore deposits until use.
Historically, earlier frameworks offered slightly more flexibility in offshore parking, but the 2026 amendments tightened these rules to ensure tighter monitoring of capital flows and to guarantee that offshore debt is genuinely utilized for productive domestic economic activity rather than financial speculation.