What are the major components of capital Account among the followings ?
(A) Bank Deposits
(B) Investments
(C) External Borrowings
(D) External Assistance
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 2
The correct answer is option (2) : (B), (C) & (D) Only
Capital Account: This account records all international transactions of assets. It reflects changes in ownership of national assets.
Major Components:
(B) Investments: This includes Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI), which directly affect ownership and control of assets.
(C) External Borrowings: Loans taken from foreign entities, which create liabilities and change the country's asset/liability position.
(D) External Assistance: Aid and grants received from foreign governments or organizations, which contribute to capital inflows.
Note:In the context of the Balance of Payments (BoP), only certain types of bank deposits — specifically those by non-residents (like NRIs) — are classified under the Capital Account.
However, if “Bank Deposits” is mentioned without specifying that they are from non-residents, then: