International Financing:
1. Commercial Banks:
Commercial banks all over the world extend foreign currency loans for business purposes. Standard chartered is a major source of foreign currency loan to the Indian industry.
2. International Agencies and Development Banks:
A number of international agencies and development banks provide long and medium term loans and grants to promote the development of economically backward areas in the world.
Eg. International Finance Corporation (IFC), EXIM Bank and Asian Development Bank.
3. International Capital Markets:
a. Global Depository Receipts (GDR’s):
Under GDR, shares of the company are first converted into depository receipts by international banks. These depository receipts are denominated in US dollars. Then these depository receipts are offered for sale globally through foreign stock exchanges. GDR is a negotiable instrument and can be traded freely like any other security.
The holder of GDRs are entitled for dividend just like shareholders. But they do not enjoy the voting rights. Many Indian companies like ICICI, Wipro etc. have raised foreign capital through issue of GDRs.
Feature of GDR:
- GDR can be listed and traded on a stock exchange of any foreign country other than America.
- It is negotiable instrument.
- A holder of GDR can convert it into the shares.
- Holder gets dividends
- Holder does not have voting rights.
- Many Indian companies such as Reliance, Wipro and ICICI have issue GDR.
b. American Depository Receipts (ADR’s):
The depository receipts issued by a company in the USA are known as
American Depository Receipts.
Feature of ADR:
- It can be issued only to American Citizens.
- It can be listed and traded is American stock exchange.
- Indian companies such as Infosys, Reliance issued ADR
