HSBC, UBS stop issuing P-Notes as India steps up clampdown
Sebi has shared with the government for further action a list of foreign fund houses that are found to have issued the Offshore Derivative Instruments (ODIs), popularly known as Participatory Notes (P-Notes), to Indian nationals, while probe is on in several other suspected cases of NRIs/PIOs.
A number of foreign investors including HSBC and UBS have stopped issuing controversy-ridden P-Notes as regulatory and enforcement agencies step up their clampdown on misuse of this once-popular instrument among foreigners to invest in Indian markets.
Sebi has shared with the government for further action a list of foreign fund houses that are found to have issued the Offshore Derivative Instruments (ODIs), popularly known as Participatory Notes (P-Notes), to Indian nationals, while probe is on in several other suspected cases of NRIs/PIOs.
These instruments are not allowed to be issued to Indians, NRIs or Persons of Indian origins.
Besides, another list has been shared of the investors having parked large amounts of money, each worth over USD 100 million, through these instruments.
Sebi has stepped up its scrutiny of investors issuing P- Notes, as also those parking their money in Indian markets through this route, amid a stepped-up clampdown on their misuse for round-tripping illicit funds.
These instruments used to be very popular at one point of time among foreign investors who did not want to enter the market directly and used to invest through this route provided by registered FPIs.
Consistent tightening of norms, including as per the suggestions of the Supreme Court-appointed Special Investigation Team (SIT) on Black Money has led to a sharp decline in its share -- from 56 per cent about ten years ago to less than 7 per cent of overall foreign portfolio investments in Indian markets currently.
There was a drastic decline in the outstanding values of the ODIs from the month of October to December 2016.
Among others, JPMorgan saw the value of ODIs decline by 77 per cent, while the fall was 62 per cent for Societe Generale, 58 per cent for Bank of America, 51 per cent for Citicorp and 46 per cent for Goldman Sachs.
"The ODI issuer such as HSBC Bank Mauritius Ltd has stopped issuing further ODIs and has reported 'nil' outstanding values of ODIs as of December 31, 2016," a top official said, while adding that Swiss bank UBS is also said to have stopped issuing ODIs from January.
Sebi has seen the compliance cost for ODI issuing FPIs also increase due to consistent tightening of norms by the regulator, while simultaneous liberalisation of FPI norms have made ODI route "less attractive vis-a-vis taking direct registration".
Mauritius and Singapore based FPIs issue ODIs to overseas investors which comprised 87 per cent of FPI flows through this route, also because of favourable tax treaties.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Retirement Planning: SIP+SWP combination; Rs 15,000 monthly SIP for 25 years and then Rs 1,52,000 monthly income for 30 years
Top Gold ETF vs Top Large Cap Mutual Fund 10-year Return Calculator: Which has given higher return on Rs 11 lakh investment; see calculations
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
EPF vs SIP vs PPF Calculator: Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths
04:21 PM IST