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In the following question, one term in the number series is wrong. Find the wrong term.

56, 72, 90, 110, 132, 150

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Economic Glossary

    External Commercial Borrowing

Any money that has been borrowed from foreign sources for financing the commercial activities in India are called External Commercial Borrowings.
The Government of India permits ECBs as a source of finance for Indian Corporates for expansion of existing capacity as well as for fresh investment.

Wiki Definition: An external commercial borrowing (ECB) is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers' credit, and suppliers’ credit, securitized instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc. ECBs cannot be used for investment in stock market or speculation in real estate. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies.

The ECBs are defined as money borrowed from foreign resources including the following:

  1. Commercial bank loans
  2. Buyers’ credit and suppliers’ credit
  3. Securitised instruments such as Floating Rate Notes and Fixed Rate Bonds etc.
  4. Credit from official export credit agencies and commercial borrowings from the private sector window of Multilateral Financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.

Objective of External Commercial Borrowing (ECB):

  1. Government permits the ECBs as an additional source of financing for expanding the existing capacity as well as for fresh investments. The ECB policy of the Government seeks to emphasize the priority of investing in the infrastructure and core sectors such as Power, telecom, railways, Roads, Urban infrastructure etc.
  2. There is also emphasis on the need of capital for Small and Medium scale enterprises.

How ECB is different from FDI?

  1. It must be noted that ECB means any kind of funding other than EquityIf the foreign money is used to finance the Equity Capital, it would be termed as Foreign Direct Investment. 
  2. The ECB should satisfy the ECB regulations stipulated by the Government or its agencies such as RBI. The Bonds, Credit notes, Asset Backed Securities, Mortgage Backed Securities or anything of that nature are included in ECB.

The following are not included in the ECBs

  1. Any Investment made towards core capital of an organization such as equity shares, convertible preference shares or convertible debentures. We should note here that those instruments which can be converted into equity are called convertible. The convertible instruments are covered under the FDI Policy.
  2. Any other direct capital is not allowed in ECB

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Banker's Algo Daily Dose

Word of the day

Decrees(n)

Meaning:

A formal and authoritative order, especially one having the force of law

Synonyms: act, announcement, behest, bidding, charge

Antonyms: dismiss, fire, refuse, reject

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