Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?
- A.Certificate of Deposit
- B.Commercial Paper
- C.Promissory Note
- D.Participatory Note
Correct answer
Explanation
The correct answer is D, Participatory Note. A Participatory Note, or P-Note, lets a foreign investor gain exposure to Indian shares through an FPI that is registered with SEBI, without registering in India itself. The registered foreign portfolio investor buys the Indian securities in its own name and issues an offshore derivative instrument, the P-Note, to the overseas client, passing on the gains or losses of those securities. P-Notes are popular with hedge funds and investors who want lower costs and quick entry, but they raise concerns about hidden ownership and round-tripping of money, so SEBI has tightened KYC norms for them over the years. Option A is wrong because a Certificate of Deposit is a short-term money-market instrument issued by banks to raise funds. Option B is wrong because Commercial Paper is an unsecured short-term promissory note issued by companies to borrow money. Option C is wrong because a promissory note is simply a written promise to pay a sum, governed by the Negotiable Instruments Act. Exam tip: P-Notes are offshore derivative instruments issued by SEBI-registered FPIs; CDs come from banks, CPs from companies.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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