Jaitley said that it is too early to say which route the government will take over bringing back black money. The Finance Minister assured that the government won’t take any steps that will adversely impact the nation’s investment climate.
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The SIT in its third report had recommended tighter controls over P-Notes and had said the stock market regulator should come up with regulations on the final beneficial owner of such instruments.
Suspecting misuse of the stock market platform to launder black money, the SIT said that Sebi should also monitor unusual rise in share prices of small companies while the Enforcement Directorate should take action under the Prevention of Money Laundering Act for predictable offences.
Das also said: “at the moment there is no need to panic”. The government will consult RBI, SEBI and others before taking any step.
Seeking to calm the jittery markets, he said there should be no uncertainty in market as presently status quo prevails.
Investments through P-Notes into the stock market touched a seven-year high of Rs.2,85,000 crore in May. The BSE Sensex opened as much as 1,013.96 points lower on October 17, 2007, at 18,037.90 points, over the previous close at 19,051.86 points. It was Rs 2.seventy five lakh crore on the finish of June.
However declined to give a time line on when the decision will be taken but confirmed that there would definitely be wider consultations. If the government is serious about tackling black money, it has to crack down on P-Notes and ensure Sebi gets full details of beneficial ownerships- and if Sebi does have details of beneficial ownerships as some officials claim, this needs to be shared with the taxman. But each time there has been any attempt to plug such loopholes, there has been an outflow of FII funds -that is also the reason why both this and the previous government have put off GAAR provisions for so many years on investments through countries like Mauritius, and that is why the Sebi banning of P-Notes was quickly reversed some years ago. “There is not any cause for the market to react adversely”, Das stated.
P-Notes, mostly used by overseas HNIs (High Net Worth Individuals), hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered Foreign Institutional Investors (FIIs).
When asked if the finance ministry would be concerned with inflows from specific jurisdiction like Cayman Islands, he said we are moving to regime of automatic exchange of information and irrespective of the source from where the money is flowing in, we will now start getting the information.
The government will take into account all inputs and views of stakeholders before finalising its views on the issue, he said.
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Revenue secretary Shaktikanta Das said there was no need for market participants to prejudge which way the government would decide (on the issue of P-notes).
