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What is round tripping, a term used in the context of FII investments in India?

It refers to the alleged practice of Indian black money finding its way back into Indian stock exchanges through the FII route. Foreign institutional investors (FIIs) are registered with SEBI and they alone are allowed to operate in the Indian bourses as far as foreigners are concerned.

But this has not deterred FIIs from entertaining those who enter into an OTC deal with them abroad through what is known as Participatory Notes (PNs) on which SEBI got tough last year. People in the know say that the opaque mechanism of PNs lends itself to misuse of the FII route — Indians with black money stashed away abroad use it to invest in the Indian bourses. This practice is known as round tripping.

S. MURLIDHARAN

More Stories on : Foreign Institutional Investors | For the Asking

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