ECB-FDI-ODI-BRANCH OR PROJECT OFFICE

Q.1 FC-GPR is Statement submitted by the recipient of FDI in India to RBI through their
banker reporting issuance of shares/ convertible debentures or warrants . What is the
time limit for submitting this statement to RBI?

1. As and when shares are issued to the investor.

2. Within one year from date of receipt of Foreign Funds by the recipent company.
3. Within 30 days from date of issuance of equity shares.
4. Within one month from finalisation of Balance Sheet of the company after receipt of
Foreign Funds.

Correct Answer – 3

Explanation: Please refer PART I, Section V, para 1 (iii) and (iv)(a) of Master Circular on
Foreign Investment in India. The company need to make allotment within 180 days days
from the date of receipt of the inward remittance and report in FC-DPR within 30 days of
issuance of shares.

Q.2 What is Foreign Portfolio Investment Scheme (PIS)

1. This is Scheme to allow Foreign Investment in Banks in India.

2. This is the scheme for allowing resident Indians to make overseas investment.
3. This is the scheme to allow NRI/PIO to make investment from NRE/FCNR Account.
4. This is the scheme to allow investments by NRI or SEBI Registered FPIs.

Correct Answer – 4

Explanation: Please refer PART I, Section II, para 1 Master Circular on Foreign Investment
in India
Q.3 Can a person other than Resident Indian set up Proprietorship/Partnership firm in
India? Here, please consider Partnership Firm different than the LLP (Limited
Liability Partnership).

1. Yes, India is looking for more and more Foreign Investment.

2. No, Income Tax Act does not allow person other than Resident Indian to invest and
generate income in India.
3. The FEMA does not allow person other than Resident Indians to invest in Partnership
Firm in India.
4. As per FEMA only NRI and PIO (Person of Indian Origin) are allowed, subject to
conditions, to invest in Partnership Firm in India.

Correct Answer – 4

Explanation: Please refer PART II, para 1 Master Circular No. 15/2015-16 dated 01 July 2015
on Foreign Investment in India and Schedule 4 of Notification No. FEMA 20(R)/ 2017-RB
dated 07 November 2017

Q.4 FDI (Foreign Direct Investment) is prohibited in …..

1. Television Broadcasting Services

2. Atomic Energy Sector
3. Print Media (Newspaper and magazine) Sector
4. Aviation Industry

Correct Answer – 2

Explanation: Please refer Regulation 15 and 16 of RBI Notification No. FEMA 20(R)/ 2017-
RB dated 07 November 2017
Q.5 One of the following is not counted/included for calculating financial commitment of
Indian Company to calculate cap of ODI Investment limit i.e. 400% of net worth,
under RBI guidelines?

1. Guarantees issued by Indian Company for the benefit of their overseas JV/WOS.
2. Loan given by resident company to their overseas JV/WOS.
3. Investment/Loan by resident company remitted from EEFC account, to their overseas
JV/WoS.
4. Guarantees issued by Indian Company for the benefit of oversease second Step
Down Subsidiary.

Correct Answer – 3

Explanation: Please refer para B.4 of FED Master Direction No. 15/2015-16 dated 01 January
2016

Q.6 Which of the following type of financial commitments by an Indian Party is not
permitted under ODI (Overseas Direct Investment)?

1. Contribution to equity shares of the Joint Venture/ Wholly Owned Subsidiary abroad
2. Contribution to the Joint Venture/ Wholly Owned Subsidiary as preference shares
(for reporting purpose to be treated as loan)
3. Loans to its the Joint Venture/ Wholly Owned Subsidiary
4. Open ended corporate guarantee issued on behalf of its overseas Joint Venture/
Wholly Owned Subsidiary

Correct Answer – 4

Explanation: Refer regulation no. 6(3) of Notification FEMA.120/RB-2004 dated: July 7, 2004
Q.7 What is ceiling on All in Cost for Rupee denominated bonds (Known as Masala
Bonds) issued overseas by Indian entity?

1. 350 BPS (Basis Points) over 6 month USD LIBOR

2. 350 BPS (Basis Points) over the prevailing yield over the Government of India
securities of corresponding maturity
3. 300 BPS (Basis Points) over the prevailing yield of the Government of India securities
of corresponding maturity
4. In line with the market conditions

Correct Answer – 3

Explanation: Refer para 3.3.4 of FED Master Direction No. 5/2015-17 date 01 January 2016

Q.8 Proceeds of Rupee denominated bonds issued overseas by Indian entity can’t be used
for following purpose?

1. Refinancing an existing Foreign Currency External Commercial Borrowing

2. Real estate activities for development of integrated township / affordable housing
projects in India
3. Investing in capital market and using the proceeds for equity investment
domestically
4. Import of Capital Goods in India

Correct Answer – 3

Explanation: Refer para 2.4.5 of FED Master Direction No.5/2015-17 date 01 January 2016
Q.9 Indian company having overseas office requests bank to remit funds for purchase of
immovable property (Residential) outside India for its employees, should the bank
allow it?

1. Yes, if the company is allowed to open overseas office, the company is free to
purchase residential property for employees' residence
2. No, purchase of immoveable property is capital account transaction and requires
approval from RBI
3. Yes, it is allowed provided the total amount does not exceed the limit prescribed for
initial and recurring expenses for overseas office
4. No, under extant FEMA directions, companies are allowed to purchase immovable
property only for business purpose

Correct Answer – 3

Explanation: Refer A.P. (DIR Series) Circular No. 43/2015-16 [(1)/7(R)] date 04 February 2016

Q.10 NRIs (Non Resident Indians) can purchase shares, convertible debentures and
warrants issued by an Indian company on non-repatriation basis, upto..........?

1. USD 250,000 provided consideration is paid by inward remittance through banking

channels from abroad or out of funds held in NRE/FCNR(B)/NRO account
2. USD 100,000
3. No limit, provided consideration is paid by inward remittance through banking
channels from abroad or out of funds held in NRE/FCNR(B)/NRO account
4. No limit

Correct Answer – 3

Explanation: Refer Annexure - 4 of FED Master Direction No.11/2017-18 date 04 January 2018
Q.11 Can Non-resident Indian (NRI) or an Overseas Citizen of India (OCI) purchase the
following instruments on repatriation basis, without limit?

1. Government dated securities (other than bearer securities) or treasury bills or units of
domestic mutual funds
2. Bonds issued by a Public Sector Undertaking (PSU) in India
3. Bonds/ units issued by Infrastructure Debt Funds
4. All the above

Correct Answer – 4

Explanation: Please refer Para 6 of FED Master Direction No. 11/2017-18 dated January 4, 2018

Q.12 The RBI FED Master Direction 5/2015-16 dated 01 January 2016 contains
comprehensive guidance on External Commercial Borrowing. With reference to these
guidelines, which one of the following is not included in the ECB

1. Loan from overseas equity holder by the Indian Company

2. Foreign Currency Convertible Bond issued by the Indian Company and subscribed
by the overseas entity
3. Buyer’s credit or Supplier’s Credit
4. Foreign Currency Term Loan by AD Bank which generally known as FCNR(B) Loan

Correct Answer – 4

Explanation: Please Para 2.2 FED Master Direction No. 5/2015-16 dated January 1, 2016
Q.13 Credit is received by AD Bank in its Nostro Account for their customer, a registered
partnership firm. The customer reports it as External Commercial Borrowing from an
eligible overseas lender and submits duly filled Form-83 requesting to credit the
amount to their account. What response/action bank should take?

1. Bank shall credit the amount to customer’s account and submit Form-83 to RBI to
obtain UIN (Unique Identification Number)
2. Bank should advise customer to wait till they examine Form-83, verify KYC of the
overseas lender and obtain UIN from RBI before credit is passed to their account
3. Bank should return the funds to remitter under advice to the customer since External
Commercial Borrowing is allowed only to Companies and other approved entities
4. Bank should hold the credit in Nostro Account and approach RBI requesting
permission for allowing ECB to the partnership firm.

Correct Answer – 3

Explanation: Please refer Para 2.4.2 of FED Master Direction No. 5/2015-16 dated January 1,
2016. ECP is not permitted to partnership firm under automatic route

Q.14 A resident company having Overseas Subsidiary Company (WOS) require credit
facilities at WoS for which an overseas bank agrees if sufficient collateral/security is
provided. Can the onshore promoter company or its associates including director
offer onshore collateral/security?

1. No, creation of charge on domestic assets of resident in favour of non-resident i.e.

overseas bank for credit facilities requires RBI’s permission
2. Yes, creation of charge on assets in favour of non-resident i.e. overseas bank is
permitted for fund based facility drawn by WOS in interest of resident parent
company
3. No, the creation of charge on domestic assets in favour of non-resident i.e. overseas
bank requires prior permission from Ministry of Home Affairs in India
4. Yes, creation of charge on domestic assets in favour of non-resident lender is allowed
under automatic route subject to compliance of certain conditions under the extant
RBI Guidelines

Correct Answer – 4

Explanation: Please Para B.19 FED Master Direction No. 15/2015-16 dated January 1, 2016
Q.15 Bank has received FDI for a sector in which though investment is allowed under
automatic route but is subject to Sectoral Cap. In the context of the cap, when can
bank credit account of customer?

1. As per RBI, bank can credit account of customer on receipt of FC-GPR Form with
company secretary’s confirmation of compliance in this regard
2. As per RBI, bank can credit account of customer after the filing of FC-GPR as
acknowledged by RBI
3. As per RBI, bank can give credit only after receipt of confirmation from SEBI that
Sectoral Cap is not breached
4. No procedural requirement or documentation suggested by RBI, the onus of
compliance with the sectoral and statutory caps on foreign investment and attendant
conditions if any, is on the company receiving foreign investment.

Correct Answer – 4

Explanation: Ref 5.2.8 of FED MD No. 11/2017-18 dt Jan 04, 2018

Q.16 A resident individual requests bank to remit USD 45000 under LRS for portfolio
investment in shares of Apple Inc. listed at NASDAQ. The desk officer after
scrutinising the request asked customer to provide Form 15 CB and 15 CA. Is the
requirement of desk officer valid?

1. No, only Form 15 CB which determines the liability of tax is required

2. No, only Form 15 CA which is evidence of payment of applicable tax, required
3. Yes, both Form 15 CA and CB is required for remitting funds overseas
4. No, neither of the forms is required

Correct Answer – 4

Explanation: Please refer Government of India Notification No. G.S.R. 978(E) dated 16
December 2015. Form 15 CA or CB is not require for LRS Remittances
Q.17 Foreign direct investment is prohibited in Real Estate Business or Construction of
Farm Houses in India. Your bank has received remittance for a company (Builder)
engaged in development of townships, construction of residential/ commercial
premises, roads. Should bank credit customer's account?

1. No, bank should refer the transaction to RBI for approval

2. No, bank should refer the transaction to FEDAI for clarification
3. No, bank should return the fund back
4. Bank can credit customer's account

Correct Answer – 4

Explanation: Please refer Para 2.20 and Para 3 of FED Master Direction No.11/2017-18 date
January 04, 2018

Q.18 Foreign Direct Investment (FDI) is the investment through capital instruments by a
person resident outside India. Which one of the following is not counted as capital
instrument?

1. Equity Shares
2. Preference Shares or Share Warrants
3. Bonds
4. Debentures

Correct Answer – 3

Explanation: Please refer Para 2.2 and Para 4 of FED Master Direction No.11/2017-18 date
January 04, 2018

Q.19 Is the external commercial borrowing permitted under extant RBI Directions for
repaying short term buyers credit obtained for import of capital goods?

1. Permitted but maximum for the period three years from the date of shipment
2. Not permitted
3. Permitted only for consistent foreign exchange earners
4. Permitted

Correct Answer – 4

Explanation: Please refer Para 2.4.5 End Use Prescription in FED Master Direction
No.5/2015-16 dt. 01 January 2016
Q.20 The FDI in an Indian Company comprise sum total of direct and indirect foreign
investment. All investments made directly by non-resident entities into the Indian
company are counted towards 'Direct foreign investment. What is indirect
investment?

1. Receipt of foreign funds as debt instead of capital

2. Investment by another Indian investing company having foreign equity shareholding
3. foreign investors subscribing to capital through GDR (Global Deposit Receipt) route
4. Receipt of foreign fund through convertible debt instruments such as debentures or
warrants

Correct Answer – 2

Explanation: Please refer para A 1 (vi) of Annexure to RBI AP (Dir) Circular No. 1 dated
July 04, 2013. Para 9.1.15 of FED Master Direction No. 11/2017-18

Q.21 Is rollover of guarantee issued by a resident company in favour of an overseas bank,

for securing credit facility to its overseas subsidiary Permitted under automatic route?

1. Yes, subject to compliance of certain conditions

2. No, the company require prior permission of RBI
3. No, the company require prior permission from their designated A D Bank
4. No, the rollover is not permitted

Correct Answer – 1

Explanation: Please refer RBI AP(Dir) Circular No.83 dated January 3, 2014 Para B 18 of
FED Master Direction No. 15/2015-16

Q.22 In which format the borrower and AD Bank are required to report ECB Transactions
conducted under automatic route, to Reserve Bank of India?

1. Form 83
2. ECB Form
3. FC-GPR Form
4. ODI Form

Correct Answer – 1

Explanation: Please refer Para 2.12 Reporting Requirement FED Master Direction
No.5/2015-16 dt. 01 January 2016
Q.23 A wholly owned overseas subsidiary company of an Indian Company proposes right
issue to parent holding company at valuation below the value of equity. Is this
permissible under the extant RBI directions?

1. Yes, since Indian Co. is benefitted

2. Yes, provided the investment including right issue does not exceeds limit prescribed
under ODI
3. No, ODI investment is permitted only by subscribing the capital issue at par
4. No, this need to be referred to RBI

Correct Answer – 4

Explanation: Please refer FED Master Direction No. 15/2015-16 date January 01, 2016, in
particular the para B.1 Automatic Route