SEBI may tighten norms on P-notes as per SIT requirements

Indian market watchdog Securities and Exchange Board of India (SEBI)  may further tighten the rules with respect to participatory notes (P-notes). This may happen in the wake of all the noise being raised about the route being used for laundering illicit money.

P-notes are instruments issued by registered foreign portfolio investors (FPIs) to overseas entities who want to participate in the Indian market without being directly registered. They are basically derivative instruments with debt and equity being the underlying securities.

The financial market regulator may further tighten the noose on such participatory notes if so desired by the SIT (Special Investigation Team on black money). It has often been said that P-notes are a modus operandi to route money back into the country.

SEBI has been tightening the regulations since long which has been reflected in the decrease in the usage of this modus operandi as the value of P-notes with equity or debt being underlying only accounted for 7.5 per cent of all the assets of FPIs from the high of almost 50 per cent in 2007-08 period.