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July 9, 2001
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Money > Business Headlines > Report July 9, 2001 |
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Delay likely for two-way fungibility in ADR/GDRsSubhomoy Bhattacharjee Two-way fungibility in American Depository Receipts and Global Depository Receipts issued by Indian corporates is likely to be delayed with the government yet to decide on its actual implementation. Finance Minister Yashwant Sinha had announced in this year's Budget that two-way fungibility in ADR/GDRs would be allowed. While the finance ministry has been in consultation with the Reserve Bank of India and the Securities and Exchange Board of India, it has encountered certain hiccups on the interpretation of the fungibility process. "Whether shares once unlocked from ADRs or GDRs transferred from abroad would qualify the company to automatically issue fresh shares abroad against the ones brought back is one such issue," top finance ministry officials said. The ministry says since the country does not allow capital account convertibility, RBI will have to come up with an alternative. If two-way fungibility is implemented, RBI will also have to relax its exchange controls further. The ministry will also have to make amendments in the Foreign Exchange Management Act, which currently does not allow two-way automatic transfer. Under the existing system, companies have to apply to the government for issuing an ADR/GDR, which will be in accordance with the provisions of the FDI limit for each sector. In its meeting with the ministry, RBI has also pointed out that Indian companies have been allowed to make foreign investment of up to 100 per cent of their ADR/GDR. Powered by YOU MAY ALSO WANT TO READ:
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