Module: General Practice
Q85: Scenario: "TechIndia Ltd," an Indian startup, wants to issue Compulsorily Convertible Debentures (CCDs) to a US-based investor. Simultaneously, "InfraCo," another Indian firm, plans to raise a Foreign Currency Loan (ECB) from a German bank.
Who regulates the rules/limits for these two transactions respectively?
✅ Correct Answer: C
Option C. Concept Definition: Classification of Instruments.
Structural Breakdown: 1. CCDs (TechIndia): Under FEMA, Compulsorily Convertible Debentures are treated as Equity (Non-Debt) because they must convert to equity.
Jurisdiction: Central Govt (NDI Rules). 2. ECB Loan (InfraCo): This is pure Debt.
Jurisdiction: RBI (Foreign Exchange Management (Borrowing and Lending) Regulations). Causal Reasoning: The instrument's nature determines the regulator.
Anything that is or becomes equity is Govt territory; pure debt remains RBI territory.
Structural Breakdown: 1. CCDs (TechIndia): Under FEMA, Compulsorily Convertible Debentures are treated as Equity (Non-Debt) because they must convert to equity.
Jurisdiction: Central Govt (NDI Rules). 2. ECB Loan (InfraCo): This is pure Debt.
Jurisdiction: RBI (Foreign Exchange Management (Borrowing and Lending) Regulations). Causal Reasoning: The instrument's nature determines the regulator.
Anything that is or becomes equity is Govt territory; pure debt remains RBI territory.