These sources mainly include (i) purchase of foreign exchange on-shore from an authorised dealer in India, (ii) capitalisation of foreign currency proceeds to be received from the foreign entity on account of exports, fees, royalties or any other dues from the foreign entity for supply of technical know-how, consultancy, managerial and other services, (iii) swapping of shares of Indian entity with those of overseas entity, (iv) use of balances held in the Exchange Earners’ Foreign Currency (EEFC) accounts of Indian entity maintained with an authorised dealer, (v) foreign currency proceeds through ECBs/FCCBs, and (vi) exchange of ADRs/GDRs issued in accordance with the scheme for issue of Foreign Currency Convertible Bonds.
These positions still carry some risk in that some U.S. banks’ counterparties might conceivably fail to make good on their obligations, but such risk is mitigated by the fact that the counterparties to large U.S. dealer banks for sovereign CDS trades are dispersed, primarily across large financial institutions.