P-Notes not to be banned overnight: Shaktikanta Das

In an interaction with industry, revenue secretary Shaktikanta Das said, “It is nobody’s intention to ban P-Notes overnight.

Seeking to reassure foreign investors that it will not take any steps that “undermines the growth momentum”, the government on Thursday said that participatory notes (P-Notes) “will not be banned overnight” and stakeholders will be consulted before a decision is taken, even as it signalled that the know-your-customer (KYC) norms will be strengthened for such instruments.

In an interaction with industry, revenue secretary Shaktikanta Das said, “It is nobody’s intention to ban P-Notes overnight. SIT report highlights that there is a need for further improvement in P-Notes regulations… and government will examine how to improve the KYC norms”.

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The comments come amid the apprehensions that the government will crack down on P-Notes following the recommendations of Supreme Court-appointed SIT. The Special Investigation team (SIT) had suggested that Sebi should have information about the beneficial owner of P-Notes and other such offshore derivative instruments on concerns that illegal wealth is being re-routed into the country through these instruments.

“A covert and carefully considered decision on recommendation of SIT will be taken … government is in the process of consulting RBI and Sebi on the recommendations on P-Notes” Das said. A P-Note is a derivative instrument issued by a foreign portfolio investor (FPI) against underlying Indian securities which allow these investors to earn returns on investment in the Indian market without undergoing the significant cost of directly investing in India. Earlier, finance minister Arun Jaitley had said that the government will take into account the impact on the investment climate while considering the SIT report on black money.

Further, Das said that the government has started the Budget preparation and will work towards bringing stability in the taxation regime.