Which of the above can be included in Foreign Direct Investments? Foreign currency convertible bonds? Foreign institutional investment with certain conditions? [2021]

Consider the following:

Foreign Currency Convertible Bonds (FCCBs) are bonds issued by an Indian company, denominated in a foreign currency, with both principal and interest payable in that currency. FCCBs possess a unique dual nature, functioning as both debt and equity instruments. They operate as traditional bonds by offering regular coupon payments and principal repayment, but they also grant investors the option to convert them into equity. Consequently, at maturity, bondholders have the flexibility to convert the equivalent value into equity at a predetermined conversion rate, making FCCBs fall within the purview of Foreign Direct Investment (FDI).

Foreign Institutional Investors (FIIs) are generally considered part of Foreign Portfolio Investments (FPI) because their investments are usually short-term and do not provide control over the companies in which they invest. However, according to FII regulations, if an FII’s investment in an Indian company exceeds 10% of the total issued capital, it can be reclassified as Foreign Direct Investment (FDI). This is because such a level of investment may provide significant influence or control over the company’s management and operations, which is a key characteristic of FDI.

A global depositary receipt is a negotiable certificate issued by a bank. The certificate represents shares in a foreign company traded on a local stock exchange. GDRs give companies access to greater capital and investors the opportunity to invest in the equity of foreign companies. They are considered as Foreign Direct Investment (FDI).

NRE deposits are savings or fixed deposits made by non-resident Indians (NRIs) in Indian banks in foreign currency. NRE deposits are not considered FDI as they are simply deposits in a bank account and do not involve equity investment in a company.