New Delhi, The Finance Minister, Mr P. Chidambaram, has defended the proposed curbs on issuance of participatory notes (PNs) by Foreign Institutional Investors, stating that this step was aimed at moderating such anonymous capital inflows, which, he said, have become “very copious” and “abundant”.
“Investors through PNs are certainly welcome to invest in India, but for the present it is important to moderate these capital flows. If an investor through PN wishes to register as an FII and invest, he or she is most welcome”, Mr Chidambaram told reporters outside his North Block office here on Wednesday.
Stating that the Government was not in favour of “banning” PNs nor has it banned them, Mr Chidambaram said that a cap has only been placed on the proportion of money coming through PNs vis-À-vis assets under management or overall derivatives position.
‘No need for alarm, panic’
He also made it clear that the consultation paper, issued by SEBI on Tuesday evening, would become regulation, with or without modifications, on October 25. Mr Chidambaram highlighted that a number of FIIs were buyers at the stock exchanges on Wednesday morning and that there was no need for any panic or sense of alarm on account of the SEBI’s proposed move.
“I was surprised at one or two alarmist statements yesterday and this morning on television (about the SEBI move). These are unfortunate. There is no need or place for any alarmist statements”, he said.
The Finance Minister also said that SEBI’s proposed move on offshore derivative instruments (ODI) was the culmination of long discussions between the Reserve Bank of India, SEBI and the Government.
“Capital inflows are copious and it is in our interest to moderate these inflows. They are contributing to a steep and sharp rise in stock markets. It is in the interest of all – retail investor, trader, broker, big investor – that these flows are moderated. SEBI’s move is a good step and necessary step”, he said.
The year-on-year increase in ODIs such as PNs and the anonymity it provides to investors have been engaging the attention of the regulators over the last few years.
