Participatory Notes (P-notes)

Participatory Notes (P-notes)

➥Investments through participatory notes into Indian capital markets have plunged to over nine-year low of 80,341 crore till July-end amid stringent norms put in place by the watchdog SEBI to check misuse of these instruments.

➥The decline could be attributed to several measures taken by the market  watchdog to stop the misuse of the controversy-ridden participatory notes.

WHAT ARE P-NOTES?

These are used by overseas market participants that don't want to get get registered as foreign institutional investors (FIIs). P-notes are not issued in India, rather these are issued by an India registered FII to other overseas investors.

⏩The FII will be the entity  to initiate a transaction in our stock markets, which could be on behalf of the client albeit in the name of the FII.

⏩What are govt & why P-notes are worrying is because of the anonymous nature of the instrument as these investor s could be beyond the reach of Indian regulators.

⏩Further, there is a view that is being used in money laundering with wealthy Indians, like the promoters of companies, using it to bring back unaccounted funds and to manipulated their stock prices.