Mumbai, Sept 17: The Reserve Bank of India (RBI) has put a blanket ban on overseas corporate bodies (OCBs). Two years ago, the regulator had prohibited them from secondary market trading. On Tuesday, these overseas investment entities, often suspected to be conduits for unaccounted and hawala money, were also banned from the primary market.
With this, OCBs have been derecognised as an ‘eligible class of investor’ under various routes/schemes available under the foreign exchange regulations.
While the central bank has said that its decision is a follow-up on the recommendations of the joint parliamentary committee on the security market scam, the timing of the ban seems to suggest that this is another attempt at checking the huge inflow of foreign exchange into the country.
OCBs are entities where 60% of equity is with NRIs. However, it was always suspected that NRIs were simply fronts for resident Indians. Thus, the decision to ban OCBs could also have been driven by the fact that they do not fall under the purview of any of the regulatory bodies in India and were totally non-transparent.
Bureau Report