Indian companies are allowed to raise equity capital in the
international market through the issue of Global Depository Receipt (GDR). These are designated in Dollars/euro or any other foreign currency.
GDR are used for financing capital goods imports, capital expenditure
including domestic purchase/installation of plant, equity investments in Joint
Ventures etc. in India.
India is already had a SIT committee for curbing black money chaired by M.B.Shah as chairman and submitted report to SC about suspect names
Recently probe of misuse of stock markets for evasion of black money and tax evasion continues leading GDR is being used for bringing back black money.
Finding through some web entries registered in various jurisdictions like Hong Kong, Singapore, Dubai etc.
SEBI has seen in some cases that GDR route have been used for round tripping of the funds in the name of capital raising activities of listed companies from abroad as similar cases are found by other agencies too.
This needs to be dealt immediate as already India is on heavy burden of Black money running in the economy unaccounted.
Good and Concise
GDR is certificate issued by depository bank in more than one country for shares in foreign company. The shares are held by foreign branch of international bank
but generally traded as domestic shares. It is used by private markets to raise capital denominated in either USD or Euros
Recently SEBI came across certain cases in which GDR is being used for round tripping of funds in the name of capital raising activities of listed company abroad, without actually involving real investor, hinting possible use of black money. Companies show fictitious business dealings and several bank accounts are used before the money reaches the final beneficiaries.
Round tripping of funds has been a major route for those laundering black money. Such practices also involve inflating the size of business transactions without making any real profits and are undertaken mostly to transfer illicit funds or other such assets.
Tracking this route of GDR used for transferring black money has become more difficult for Indian agencies as it involves an intricate web of entities registered in Switzerland, Hong Kong, Singapore, Mauritius, Dubai for multi-layered transfers of funds before bringing them back to India. So there is need for international co-operation to tackle down this issue effectively.
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