DNA Money Edit: Colour of foreign money in India

The government certainly wants to keep a tab on the colour and quantum of foreign investment that flows into the country. Indian companies are reportedly a little peeved at the Reserve Bank of India's (RBI) queries on foreign funds that they have received over the years. The banking regulator has made it clear that the companies have to give declarations along with the information, and there is a lurking fear that they may be pulled up for incorrect reporting. Each company has to sign the declaration stating that foreign investment received and reported now will be utilised in compliance with the provision of Prevention of Money Laundering Act 2002 (PMLA) and Unlawful Activities (Prevention) Act, 1967.

The companies that have already entered into swanky offshore structures to evade restrictions on foreign currency loans may be reluctant to give an undertaking. Some of them are also worried about a potential leakage of the classified information. Some are also wondering why receipt of foreign investment and its reporting are being linked to tougher laws such as PMLA.

In some genuine cases, companies may also find it difficult to monitor indirect foreign investment, especially when the Indian shareholder of a company is controlled by a foreign entity. Also, there will be some challenge to describe investments received from alternative investment funds (AIFs).