Market boom: Terror funding under lens

The government informed the Rajya Sabha on Tuesday that it is keeping a watch on a person who is suspected to have used the booming Indian share market for terror funding.

"Recently, a case has come to our notice. It is suspected that it may be linked to a person under watch. I cannot divulge further details," Finance Minister P Chidambaram said.

He was answering a question by BJP member Ravi Shankar Prasad on whether the government is aware of money being poured into the stock market by terrorist outfits. Prasad said National Security Advisor M K Narayanan had also raised concern over possibility of markets being used by terrorists.

The share market has witnessed a sharp rise over the last few months with the Sensex touching the 20,000 mark. The rally has been mainly led by foreign institutional investors (FIIs) who have brought in nearly $68 billion ($65.18 billion through equity and $2.7 billion through debt) till November 29, 2007.

Commenting on the issue of ban on participatory notes, the Finance Minister said the decision in this regard by the Securities Exchange Board of India (SEBI) was taken on October 25, 2007 in consultation with the government and the Reserve Bank of India (RBI).

He said participatory notes have been in vogue for many years.  The FII is one of the ways of inflow of funds and there are many other instruments. In October, SEBI had placed restrictions on derivatives. There is no absolute ban on PNs, the Minister said.