No ‘knee-jerk reaction’ on black money issue, says Jaitley

“It is too early to say what view the government will take. But it will certainly not make any a knee-jerk reaction, particularly one that can have any adverse impact on investment environment”, finance minister Arun Jaitley said, adding that the policy response would be a well-considered one.

Revenue secretary Shaktikanta Das said there was no need to “panic”, saying the Centre will decide on the SIT suggestions only after consulting Sebi, the Reserve Bank and other institutions.

Das also said: “at the moment there is no need to panic”. We will take views after consultation with stakeholders including Sebi, RBI and related institutions. “There is no need for the market to rush to any conclusion and pre-judge the issue”.

The SIT, which had been set up by the Supreme Court to suggest measures for tackling black money, in its third report said rules should be made tougher to ensure that actual beneficiaries of investments through P-notes and other overseas derivative instruments are known. The BSE Sensex opened as much as 1,013.96 points lower on October 17, 2007, at 18,037.90 points, over the previous close at 19,051.86 points.

A similar recommendation in 2007 had triggered a major collapse in the stock markets, prompting the then finance minister P. Chidambaram to announce that no such measures would be taken by the government.

“A view will be taken keeping in mind the investment environment of the country as also the objective behind the SIT recommendations”. “It is clear that obtaining information on “beneficial ownership” of P-Notes is of crucial importance to prevent their misuse”.

Investments through P-notes into the capital market had touched a seven-year high of Rs 2.85 lakh crore in May 2015. It was Rs 2.seventy five lakh crore on the finish of June.

As the share of P-notes in overall FII investment has come down sharply in the past few years, the fall in the market was not that acute this time.

The studying was as excessive as over 50 per cent on the peak of inventory market bull run in 2007.

“There is no reason for the market to react adversely…”

However declined to give a time line on when the decision will be taken but confirmed that there would definitely be wider consultations. “There is not any cause for the market to react adversely”, Das stated.

When asked if the finance ministry would be concerned with inflows from specific jurisdiction like Cayman Islands, he said we are moving to regime of automatic exchange of information and irrespective of the source from where the money is flowing in, we will now start getting the information.

Participatory Notes or P-Notes are instruments issued by registered foreign institutional investors (FII) to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator. “The government will take a decision after going through recommendations of SIT”, he said.