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?

Question

Question

This question was previously asked in

Official UPSC Civil Services Exam 2019 Prelims Part A

Answer 1

The correct answer is the Participatory Note.

P-Notes or Participatory Notes are Overseas Derivative Instruments that have Indian stocks as their underlying assets.
- They allow foreign investors to buy stocks listed on Indian exchanges without being registered.
Certificate of Deposit (CDs) is short-term instruments issued by Commercial Banks and Special Financial Institutions (SFIs), which are freely transferable from one party to another.
- The maturity period of CDs ranges from 91 days to one year.
- These can be issued to individuals, co-operatives and companies.
Commercial paper, or CP, is a short-term debt instrument issued by companies to raise funds generally for a time period up to one year.
- It is an unsecured money market instrument issued in the form of a promissory note and was introduced in India in 1990.
A promissory note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money.