Explain the financial instruments used in international financing.
Financial instruments used in international financing are
- International Depositary Receipt (IDR): This is an instrument in the form of a depository receipt used in Indian currency which was created by a domestic depositary against the underlying equity of an issuing company i.e. the custodian of securities registered with the SEBI. Because of this, foreign companies were able to raise funds from the Indian Securities Markets. The shares of the foreign company IDR will be deposited to an Indian depository. The depository receipt holders in India would then receive the benefits of the underlying shares such as bonus and dividends.
- American Depositary Receipt (ADR): This is a depository receipt, issued by a company in USA. As regular stocks, this is bought and sold in American markets and issued only to American citizens. On the stock exchange of USA, a depository receipt can be listed and traded.
- Global depository Receipt (GDR): This depository receipt is dominated in US dollars. This is issued by the depository bank to which the local currency shares of a company are delivered. This can be traded easily as any other security because it is a negotiable instrument.
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