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The Sahoo Panel has submitted a crucial report on Indian Depository Receipts (IDR) to the Finance Ministry.
This report, among other things, has made a case for expanding the scope of IDRs for Indian investors.
Panel proposals
The Finance Ministry-appointed Sahoo Panel has recommended that IDRs be allowed not only against equity shares, but also against all financial instruments.
The current legal framework on IDRs stipulates that such instruments can be issued only against underlying equity shares.
If the Government accepts this recommendation, then an Indian investor will get to invest in any IDR which has corporate bonds or exchange-traded funds as underlying instrument.
"Yes, the IDR report has been submitted by me to the Finance Ministry recently", M.S.Sahoo, who was head of the Panel told Business Line when contacted.
Sahoo had submitted this report to Finance Secretary Arvind Mayaram.
IDRs are receipts denominated in Indian rupees, created by a domestic depository against the underlying equity shares of an issuing company.
The IDR report is on the lines of an earlier report submitted by the same panel in the case of global depository receipts.
As an instrument for raising capital from India and improving visibility here, IDRs have not taken off. So far, over the last decade, only one issuer — Standard Chartered Bank — has issued IDRs. The receipts issued by this foreign bank have been listed on the NSE and the BSE.
The Sahoo panel’s recommendations have hinged on the principle of reciprocity.
“There cannot be a policy situation where we encourage only inflows and deprive our local domestic investors from investing abroad. There have to be outflows too. This report will send a clear message that India is liberal and truly open,” said an offical involved with the preparation of IDR report.
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