New depository scheme to come into effect this yr, says FinMin

Last Updated 26 September 2014, 15:49 IST

Providing an avenue for foreign companies to list their securities on Indian exchanges, the government today said it expects the new depository scheme to come into effect this year.

An Indian government official said the new scheme is anticipated to be notified in about two weeks time.

Narendra Modi is all set to begin his maiden US visit as Prime Minister at a time India is looking to attract more foreign investments.

"We expect the new depository scheme to be notified in about two weeks time and it should come into effect from December 1, 2014.

"Some tax amendments also need to be done and those would come into effect from April 1, 2015," Manoj Joshi, Joint Secretary in Finance Ministry, told a group of US investors here.

The government has proposed 'Bharat Depository Receipts' (BhDR) and the new scheme would be complementary to the existing ADR or American Depository Receipt regime under which Indian companies get listed on the American stock exchanges.

A government-appointed panel, headed by M S Sahoo, had proposed BhDRs -- a rupee dominated instrument that would be issued by domestic depository against listed equities or other financial assets of a foreign company. Sahoo is a former whole time member of Indian capital markets regulator Sebi.

According to Joshi, the final norms being notified were broadly similar to those recommended by the Sahoo panel, except for tax issues especially for depository issuances of unlisted Indian companies.

Speaking here today, he said that a friendly tax structure needs to be put in place for the new regime.

The panel, in its report to the Finance Ministry earlier this year, had suggested that laws and regulations relating to markets and Indian institutional investors must be modified to ensure that there is a level playing field between an Indian security and a DR.

"... a complete suite of BhDRs should be allowed to be issued and traded in India to make the Indian financial system more competitive, and to provide greater choice to Indian investors," the report had said.

(Published 26 September 2014, 15:49 IST)

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