Multiple choice

Which of the following statements is/are true?

  1. In Sept 2012, Reserve Bank of India has raised the upper limit of external commercial borrowings by any individual company or group in order to increase foreign fund flow inside the domestic economy.
  2. As per the new regulation, a company can borrow funds through the ECB route to the tune of 75% of the average foreign exchange earnings in the immediate past three years or 50% of the highest foreign exchange earnings realized in any of those three years, whichever is higher.
  3. The maximum borrowing limit of USD 5 billion will be applicable here as well.

  1. Only 1

  2. Only 2

  3. 1 & 2

  4. 1 & 3

  5. All of these

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In September 2012, RBI raised ECB limits to increase foreign capital inflow (statement 1 is true). The new regulation allowed companies to borrow up to 75% of average forex earnings over three years OR 50% of the highest year's earnings, whichever is higher (statement 2 is true). Statement 3 about USD 5 billion limit is incorrect - the $5 billion limit applied to a different category and wasn't automatically applicable here.

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