According to reports from the Reserve Bank of India, banks can not extend loans against Indian Depository Receipts (IDRs) issued by overseas companies. An IDR is nothing but a rupee-denominated instrument in the form of a depository receipt created by an Indian depository against the underlying equity of the issuing foreign company.
IDRs enable foreign companies raise resources from India. IDRs are listed on the stock exchanges in the country. It is similar to American or Global Depository Receipts (ADRs), where Indian companies raise resources overseas. Recently the RBI had announced that no bank should grant any loan/advance for subscription to IDRs and no bank should grant any loan/advance against security/collateral of IDRs issued in the country. The banks are still allowed to provide loans against shares and debentures.
Reports said that India had allowed eligible companies resident outside India to issue IDRs through a domestic depository with amendment in the norms in 2006, subsequently the UK-based Standard Chartered Plc became the first company to issue IDRs in 2010. It was the only firm to raise funds from IDRs as no other global firm has shown interest in mobilising money from Indian market thereafter. The IDRs are issued in Indian rupee.
The RBI recently announced that the proceeds of the issue of IDRs is repatriated outside India by the companies issuing such instruments.