Swiss bank money finds its way into Indian stock market
It is estimated that approximately 5o to 60 per cent of the total investment made by Foreign Institutional Investor (FII) aggregating to 67 billion dollar till early 2008, was through the Participatory Notes (PNs) route.
THE PUBLIC assertion of L K Advani to bring Indian money stashed in secret bank accounts abroad back into India had unsettled the Congress leadership in no small measure.
While the Congress stonewalls for some strange reason, not many know that some portion of this money could have already made its way into India through the Participatory Notes (PNs) route.
It is estimated that approximately 5o to 60 per cent of the total investment made by Foreign Institutional Investor (FII) aggregating to 67 billion dollar till early 2008, was through the PN route.
What makes the PN route absolutely sinister is that the identities of these investors are kept secret.
Neither the market regulator Securities and Exchange Board of India (SEBI) nor the Reserve Bank of India knows about them. The RBI has repeatedly called upon the government to ban PNs as the nature of the beneficial ownership or the identity of the investor is unknown.
Further, RBI apprehended that trading of these PNs could lead to multi-layering, which will make it difficult to identify the ultimate holder of PNs.
What is worrying RBI is that some of the money coming into the stock market via PNs could be the unaccounted wealth of some rich Indians which was taken out first through the hawala route and then brought into India through as PNs.
Strangely, unlike the stringent Know Your Customer (KYC) norm applicable to domestic investors, the KYC norms for PNs are absolutely lax. This makes PNs a potent tool in the hands of Indians who have stashed money abroad and have routed it back into the Indian stock markets.
The RBI fears narco-terror money finding its way into the Indian stock market through the PN route.
When the National Security Agency (NSA), M K Narayanan, expressed apprehensions on how terrorists penetrated Indian stock markets and manipulated them a couple of years back, he was obviously referring to the PNs.
Simultaneously, the market regulator SEBI has sought to seek information from several FIIs who had issued PNs to their clients. However, SEBI has repeatedly failed as FIIs have consistently cited client confidentiality agreements to stall investigations on the matter. And strangely courts in India too seem to view that SEBI does not have the necessary legal teeth to probe further on this matter.
Surely, a portion of Swiss money has found its way back into India.
One way of dealing with the issue is to nationalise PNs (by expropriating them) now and here. Of course we can release the PNs belonging to other nationals and genuine foreign investors.
That gives a choice to the Congress.
They can endlessly debate the amount of money lying in secret bank accounts abroad. They can surely doubt the authenticity of the source of any information on this subject. They can repeatedly question what the National Democratic Alliance did when it was in power. They can wait for the G20 to take action.
Nevertheless, spelling out the plan of action to tackle PNs is the ultimate yet simple and powerful test for the Congress to demonstrate its commitment to tackle corruption and the convoluted issue of Swiss money.
Neither the market regulator Securities and Exchange Board of India (SEBI) nor the Reserve Bank of India knows about them. The RBI has repeatedly called upon the government to ban PNs as the nature of the beneficial ownership or the identity of the investor is unknown.
Further, RBI apprehended that trading of these PNs could lead to multi-layering, which will make it difficult to identify the ultimate holder of PNs.
What is worrying RBI is that some of the money coming into the stock market via PNs could be the unaccounted wealth of some rich Indians which was taken out first through the hawala route and then brought into India through as PNs.
Strangely, unlike the stringent Know Your Customer (KYC) norm applicable to domestic investors, the KYC norms for PNs are absolutely lax. This makes PNs a potent tool in the hands of Indians who have stashed money abroad and have routed it back into the Indian stock markets.
The RBI fears narco-terror money finding its way into the Indian stock market through the PN route.
When the National Security Agency (NSA), M K Narayanan, expressed apprehensions on how terrorists penetrated Indian stock markets and manipulated them a couple of years back, he was obviously referring to the PNs.
Simultaneously, the market regulator SEBI has sought to seek information from several FIIs who had issued PNs to their clients. However, SEBI has repeatedly failed as FIIs have consistently cited client confidentiality agreements to stall investigations on the matter. And strangely courts in India too seem to view that SEBI does not have the necessary legal teeth to probe further on this matter.
Surely, a portion of Swiss money has found its way back into India.
One way of dealing with the issue is to nationalise PNs (by expropriating them) now and here. Of course we can release the PNs belonging to other nationals and genuine foreign investors.
That gives a choice to the Congress.
They can endlessly debate the amount of money lying in secret bank accounts abroad. They can surely doubt the authenticity of the source of any information on this subject. They can repeatedly question what the National Democratic Alliance did when it was in power. They can wait for the G20 to take action.
Nevertheless, spelling out the plan of action to tackle PNs is the ultimate yet simple and powerful test for the Congress to demonstrate its commitment to tackle corruption and the convoluted issue of Swiss money.
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