Will the debate on the use of participatory notes (PNs) be resurrected? These notes are issued by foreign brokerage houses to unknown offshore clients. The money raised from clients is then invested in the local stock market. An estimated quarter of the foreign money coming into Indian equities is through the PN route. Both the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) worry about the proliferation of these notes. Their fear: hedge fund money is coming in through PNs. They say this could destabilize the financial system.
The CPM says that terror groups are bringing money in through PNs. This after the recent remarks by the National Security Advisor about how terrorists are using the stock market to fund their activities. The Left has demanded a ban on PNs.
PNs bring in about $2.5 billion a year. The CPM does not say how much of this comes from terrorists. We doubt it knows. Till then, a ban on PNs is a silly idea.