Module: | MODULE A: INTERNATIONAL BANKING
Q54: Consider the following statements regarding prohibited transactions:
1. Remittances for trading in foreign exchange (forex) abroad are prohibited.
2. Remittances for the purchase of Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in secondary markets abroad are prohibited.
3. Remittances for margins or margin calls to overseas exchanges are permissible up to USD 25,000.
Which of the statements given above is or are correct?
2. Remittances for the purchase of Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in secondary markets abroad are prohibited.
3. Remittances for margins or margin calls to overseas exchanges are permissible up to USD 25,000.
Which of the statements given above is or are correct?
✅ Correct Answer: A
🎯 Quick Answer:
Statements 1 and 2 are correct (Prohibited). Statement 3 is incorrect because margin trading is strictly prohibited for any amount.
Concept Definition: LRS Prohibitions (Schedule I and II). While LRS allows capital account transactions, it strictly bans speculative leverage and round-tripping.Structural Breakdown: Margin Trading Ban: You cannot send money to pay for Margins or Margin Calls to overseas exchanges.This prevents Indian residents from engaging in highly leveraged derivatives trading abroad.FCCB Ban: You cannot buy Foreign Currency Convertible Bonds issued by Indian companies in overseas markets.This prevents the manipulation of Indian corporate debt prices by residents using funds sent via LRS.Forex Trading Ban: Speculative trading in foreign currencies is not a permissible end-use. Statements 1 and 2 are correct (Prohibited). Statement 3 is incorrect because margin trading is strictly prohibited for any amount.