Module: | MODULE A: INTERNATIONAL BANKING
Q238: Consider the following statements regarding the issuance of Depository Receipts on the stock exchanges located within the international financial services centre:
Statement 1: Foreign multinational corporations are legally permitted to raise capital by issuing Depository Receipts directly on the recognized stock exchanges located within the smart city.
Statement 2: Because these stock exchanges are physically located on Indian soil, the capital raised from these Depository Receipts must be denominated and financially settled strictly in Indian Rupees.
Which of the statements given above is or are INCORRECT?
Statement 2: Because these stock exchanges are physically located on Indian soil, the capital raised from these Depository Receipts must be denominated and financially settled strictly in Indian Rupees.
Which of the statements given above is or are INCORRECT?
✅ Correct Answer: B
The question requires identifying the incorrect statement.
Statement 1 is a correct statement.
The unified regulator provides a comprehensive legal framework that allows foreign corporate entities from permissible jurisdictions to list their Depository Receipts on the exchanges within the centre, thereby accessing a new pool of global liquidity without subjecting themselves to full domestic listing regulations.
Statement 2 is the incorrect statement.
The core foundation of the international financial services centre is its legal status as a non-resident, offshore territory under foreign exchange management laws.
Therefore, despite being physically located in the country, all capital raising, trading, pricing, and final financial settlement of these Depository Receipts must be conducted exclusively in freely convertible foreign currencies, completely prohibiting the use of the Indian Rupee for these primary market transactions.
Statement 1 is a correct statement.
The unified regulator provides a comprehensive legal framework that allows foreign corporate entities from permissible jurisdictions to list their Depository Receipts on the exchanges within the centre, thereby accessing a new pool of global liquidity without subjecting themselves to full domestic listing regulations.
Statement 2 is the incorrect statement.
The core foundation of the international financial services centre is its legal status as a non-resident, offshore territory under foreign exchange management laws.
Therefore, despite being physically located in the country, all capital raising, trading, pricing, and final financial settlement of these Depository Receipts must be conducted exclusively in freely convertible foreign currencies, completely prohibiting the use of the Indian Rupee for these primary market transactions.