Sahoo panel for opening IDR window to other instruments too

The Finance Ministry-appointed Sahoo panel is all set to make a case for expanding the scope of Indian Depository Receipts for Indian investors.

In its report to be submitted to the Finance Ministry later this week, the panel is likely to recommend 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 equity.

IDRs are receipts denominated in Indian rupees, created by a domestic depository against the underlying equity shares of an issuing company.

“We are at an advanced stage of submitting this IDR report,” MS Sahoo, a former SEBI whole-time member and head of the panel, told Business Line when contacted.

The report will be on the lines of an earlier report submitted by the same panel in the case of global depository receipts. “It will be a mirror image of the ADR report. The only new element is that the panel will recommend a more rigid framework for investor protection in IDRs,” sources said.

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 are likely to hinge on the principle of reciprocity and recognise the fact that “we all live in a reciprocal world”.

“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,” sources added.

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