The government today said Participatory Notes,an instrument for overseas entities to invest in Indian stock market,is being used by Indian citizens to re-invest black money in the country.
“Investment in the Indian Stock Market through PNs is another way in which the black money generated by Indians is re-invested in India,” the White Paper on black money tabled in the Parliament said.
Participatory Note is a derivative instrument issued in foreign jurisdictions,by a Foreign Institutional Investor or its sub-accounts against underlying Indian securities. PNs are also popular among overseas investors.
“… through the instrument of PNs,investment can be made in the Indian securities market by those investors who do not wish to be regulated by Indian regulators due to a variety of reasons,” the White Paper noted.
The reasons could include the desire of investors to keep their identity anonymous,which is possible also for the reason that PNs/ODIs can be freely traded and easily transferred without disclosing the identity of the actual beneficiaries,it added.
As per the White Paper,since PNs are issued from Offshore Financial Centres (OFCs) such as the Cayman Islands,British Virgin Islands,Switzerland,and Luxembourg,it is possible to hide the identity of the ultimate beneficiaries through multiple layers.
Amid rising concerns that some of the money coming through PNs could be unaccounted wealth under the of FII investment,market regulator Sebi has been taking measures to ensure that these instruments are not used for black money laundering.