Module: | MODULE A: INTERNATIONAL BANKING
Q153: Consider the following statements regarding the operational drawdowns of offshore commercial loans:
Statement 1. Borrowers must obtain a Loan Registration Number from the central bank before making any physical drawdown of funds from the offshore loan.
Statement 2. The Authorised Dealer bank is responsible for submitting a formal regulatory application to the central bank to generate this unique numerical identifier.
Statement 3. A borrower is permitted to withdraw up to 50 percent of the principal loan amount prior to the official allotment of the Loan Registration Number.
Which of the above statements is/are correct?
Statement 2. The Authorised Dealer bank is responsible for submitting a formal regulatory application to the central bank to generate this unique numerical identifier.
Statement 3. A borrower is permitted to withdraw up to 50 percent of the principal loan amount prior to the official allotment of the Loan Registration Number.
Which of the above statements is/are correct?
✅ Correct Answer: A
The correct combination is Statement 1 and 2. The Loan Registration Number is a mandatory, unique identifying code issued by the Reserve Bank of India for every valid offshore commercial loan, commonly known as an External Commercial Borrowing.
Structurally, the process requires the borrowing entity to submit a completed regulatory form to their designated Authorised Dealer Category 1 bank.
The bank reviews the loan terms for regulatory compliance and electronically forwards the data to the central bank to generate the number.
A strict operational rule dictates that no physical drawdown of the principal amount, nor any payment of associated fees to the foreign lender, can occur until this specific number is officially allotted.
Statement 3 is incorrect because there is no 50 percent exception; the prohibition on drawdown without the number is absolute.
Historically, unmonitored drawdowns caused severe discrepancies in the national external debt accounting.
The causal reasoning behind this strict sequencing is to ensure that the central bank captures the exact debt liability and repayment schedule in its national statistical database before any cross-border capital flow enters the domestic banking system, thereby eliminating the possibility of unregistered foreign debt.
Structurally, the process requires the borrowing entity to submit a completed regulatory form to their designated Authorised Dealer Category 1 bank.
The bank reviews the loan terms for regulatory compliance and electronically forwards the data to the central bank to generate the number.
A strict operational rule dictates that no physical drawdown of the principal amount, nor any payment of associated fees to the foreign lender, can occur until this specific number is officially allotted.
Statement 3 is incorrect because there is no 50 percent exception; the prohibition on drawdown without the number is absolute.
Historically, unmonitored drawdowns caused severe discrepancies in the national external debt accounting.
The causal reasoning behind this strict sequencing is to ensure that the central bank captures the exact debt liability and repayment schedule in its national statistical database before any cross-border capital flow enters the domestic banking system, thereby eliminating the possibility of unregistered foreign debt.