Module: | MODULE A: INTERNATIONAL BANKING
Q176: Consider the following statements regarding the statutory operational boundaries of the Export-Import Bank of India:
1. The Bank is authorized to raise resources in foreign currencies to fund its foreign currency lending operations.
2. The Bank provides both pre-shipment and post-shipment export credit to Indian exporters.
3. The Bank is strictly prohibited from participating in the equity capital of foreign companies or overseas joint ventures.
Which of the statements given above is or are correct?
2. The Bank provides both pre-shipment and post-shipment export credit to Indian exporters.
3. The Bank is strictly prohibited from participating in the equity capital of foreign companies or overseas joint ventures.
Which of the statements given above is or are correct?
✅ Correct Answer: A
🎯 Quick Answer:
Option A is correct because only statements 1 and 2 are accurate.Structural Breakdown: The Bank offers pre-shipment credit to manufacture or procure goods, and post-shipment credit such as discounting bills after shipment.
It also raises significant foreign currency resources via External Commercial Borrowings and bonds.
Statement 3 is strictly incorrect because the Overseas Investment Finance program explicitly allows the Bank to finance the equity contribution of Indian promoters in overseas joint ventures or wholly owned subsidiaries.
Historical Context: The ability to lend in foreign currency was historically granted to protect Indian exporters from exchange rate volatility, allowing them to borrow and repay in the same currency they receive from foreign buyers.
Causal Reasoning: The causal reasoning for permitting overseas equity participation is to encourage Indian multinationalization.
By owning assets abroad, Indian firms secure captive markets for Indian raw materials and circumvent localized import tariffs, ultimately driving long-term economic dividends back to India.