Banks cannot provide loans against IDRs : RBI
Last Updated : 26 May 2011
Reserve Bank of India on Wednesday has said banks cannot extend loans against Indian depository Receipts (IDRs) issued by overseas companies.
An IDR is a rupee-denominated instrument in the form of a depository receipt created by an Indian depository against the underlying equity of the issuing foreign company.
It is similar to American or Global Depository Receipts (ADRs), where Indian companies raise resources overseas, IDRs enable foreign companies to do the same from India. IDRs are listed on the stock exchanges in the country.
"It has been decided that no bank should grant any loan/advance for subscription to IDRs. Further, no bank should grant any loan/advance against security/collateral of IDRs issued in India," RBI said in a notification.
However, banks are allowed to provide loans against shares and debentures.
India allowed eligible companies resident outside India to issue IDRs through a domestic depository with amendment in the norms in 2006.
The IDRs are issued in Indian rupee.
Following the amendment in norms, the UK-based Standard Chartered Plc became the first company to issue IDRs in 2010.
It also has distinction of being the only firm to raise funds from IDRs as no other global firm has shown interest in mobilising money from Indian market thereafter.
As per the norms, the proceeds of the issue of IDRs is repatriated outside India by the companies issuing such instruments. (ddi news)