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Definition: International Depository Receipt
An international depository receipt is a negotiable financial instrument that is issued by the bank to a person who has bought shares of a foreign corporation that the bank holds in trust. The receipt indicates the ownership of the stock to the person and it can be traded on the local stock exchange.
Due to the international depository receipts, the shares of a company do not have to leave the home country and thus avoid the regulatory issuing requirements of the foreign country.
As an example, if an investor from India buys stock securities of a corporation listed in the United States of America through an international bank in India, the bank will issue International Depository receipts of the corporation, that will be called in this case as American Depository Receipts and they can be traded on the local stock exchange in India.
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