Citizens' Issues
Black Money: Indians rank 16th on leaked HSBC list
There are 2,699 accounts linked to 1,688 Indians on the list and the maximum amount related with a client connected to India was $876.3 million, says an investigative report from ICIJ
With total funds of $4.1 billion, Indians rank 16th on the new leaked HSBC list of Swiss bank account holders from over 200 countries, while people from Switzerland are on the top.
The list, made public by International Consortium of Investigative Journalists (ICIJ), comprises over one lakh HSBC customers and their bank accounts with balances totalling over $100 billion. There are more than 19,000 clients not associated with any country, ICIJ said.
In terms of money in these accounts, account holders from Switzerland are on the top ($31.2 billion), followed by UK, Venezuela, US and France in the top five. India is at 16th place on this parameter.
In terms of the number of account holders, India is at 18th place (1,668 account holders), while Switzerland is on the top again with 11,235 account holders. Others in the top—five include France, UK, Brazil and Italy.
ICIJ said that its “Swiss Leaks project is based on a trove of almost 60,000 leaked files that provide details on over 100,000 HSBC clients and their bank accounts.
The data of these accounts were “secreted away by Herve Falciani, a former HSBC employee—turned—whistleblower“.
He turned the data over to the French government in 2008 and its tax authority launched an investigation.
French newspaper Le Monde obtained a version of the tax authority data and shared it with ICIJ with the agreement that it would assemble a global team of journalists to explore the data and produce this reporting project.
“The data comes from three types of internal bank files from different time periods. One reflects clients and their associated private accounts at the Swiss branch of the bank mostly from 1988 to 2007.
The leaked files also include a snapshot of the maximum amounts in the client accounts during 2006 and 2007, as also “notes on clients and conversations with them made by bank employees during 2005“.
About its findings, ICIJ said that the Swiss branch of HSBC “continued to offer services to clients who had been unfavourably named by the United Nations, in court documents and in the media as connected to arms trafficking, blood diamonds and bribery“.
“HSBC served those close to discredited regimes such as that of former Egyptian president Hosni Mubarak, former Tunisian president Ben Ali and current Syrian ruler Bashar al—Assad.
“India is ranked 16th among the countries with the largest dollar amounts in the leaked Swiss files,” ICIJ said, while adding that the maximum amount of money associated with a client connected to India was $876.3 million.
There are 2,699 accounts linked to 1,688 Indians on the list. Out of these, 1,403 client accounts were opened between 1969 and 2006.
Out of the total 1,668 clients associated with India, 51% have an Indian passport or nationality, ICIJ said.
The remaining accounts were liked to offshore companies, or were ‘numbered’ accounts.
“The bank repeatedly reassured clients that it would not disclose details of accounts to national authorities, even if evidence suggested that the accounts were undeclared to tax authorities in the client’s home country.
“Bank employees also discussed with clients a range of measures that would ultimately allow clients to avoid paying taxes in their home countries,” ICIJ said, while adding this included holding accounts in the name of offshore companies to avoid regulatory glare,” it added.



Sanjeev B

2 years ago

We need to differentiate between tax evasion vs income from illegal means (terrorism, violence, drugs).

Tax evasion is subjective and intricate, but crime isn't.

Governments and global crime agencies need to go after the real criminals and not get distracted investigating tax evaders.

Will RBI’s new regulations be effective for bond market?
RBI's new regulations on bond market prescribe settlement through clearing houses, allows inclusion of instruments issued by several agencies to bring more liquidity and the 'haircut' to help corporates to leverage more
The Reserve Bank of India (RBI) on 3 February 2015 came out with a new set of regulations on the ready forward contracts on Corporate Debt Securities replacing the old one of 2010. The new regulations are certainly looking better than the old one, but not sure of how effective will it be.
There are three things that work for the new regulation. Firstly, unlike the earlier regulations, this one prescribes for settlement through the clearing houses of the three stock exchanges, BSE, NSE and MCX-Stock Exchange (MCX-SE). This would reduce risk of malpractices adopted by the intermediaries, which is what happened in the Harshad Mehta scam. 
Secondly, the inclusion of the money market instruments and instruments issued by the multilateral agencies in the list of the eligible collaterals will bring in more liquidity in the corporate bond market. 
Lastly, the minimum haircut has been kept quite low by the RBI, which would help the corporates to leverage to a greater extent as compared to the earlier regulations. Let us discuss this by way of numerical.
Say a bank holds investments in AAA securities worth Rs100. In order to enter into a ready forward contract, the minimum haircut that it will have to bear is 7.5%. Therefore, in order to utilise Rs100, it will have to spend Rs7.5 and thus will be able to leverage up to 12 times [i.e. Rs (100 - 7.5)/ 7.5]. Thus, this would help to the corporates to leverage more than it could normally do.
What is a ready forward transaction or a repo transaction?
To describe in commoners’ language, a ready forward transaction, which is commonly known as a repo transaction, is where a repo seller sells a security to and investor with an agreement to repurchase the transaction at a pre-determined date at a pre-determined rate. In India, these have tenure of less than one year and are therefore money market instruments and the participants to these transactions are financial institutions as listed down by RBI from time to time. The concept of repo is very common in the US as well is managed by the Federal Reserve.
What is new in the new regulations?
1. The 2010 regulations allowed repo transactions against only listed corporate debt securities with an ‘AA’ or above rating held in demat form, however, the Commercial Papers (CPs), Certificates of Deposit (CDs) and other instruments including Non-Convertible Debentures (NCDs) of less than one year of original maturity, were not considered as eligible collateral. 
The new regulations have something more in store – in addition to what we had earlier, the list of eligible collateral now includes all the money market instruments which were earlier prohibited and bonds with ‘AA’ or above ratings issued by multilateral agencies like World Bank Group (e.g., IBRD, IFC), the Asian Development Bank (ADB) or the African Development Bank and other such entities as may be notified by the Reserve Bank of India from time to time. This is surely a welcome move of RBI. However, the security receipts and the securitised debt instruments still stays excluded from the definition of corporate debts securities.
2. The old regulations prescribed for OTC settlement whereas the new regulations provide that these instruments are to be settled only through the clearing house of NSE, BSE and MCX-Stock Exchange (MCX-SE).
3. The minimum rates for the haircut have also undergone change and in the new regulations, different rates have been provided for securities with different ratings. Higher the rating, lower the haircut. (Haircut means the percentage, which is subtracted from the market value of an asset that is being used as collateral.) 
For AAA/A1 securities – 7.5%
For AA+/A2+ securities – 8.5%
For AA/A2 securities – 10%
Earlier the minimum rate for the haircut was prescribed at 25%.
4. The CRR and SLR requirements for these securities will be in line with those applicable to the government securities.
The concept was in limelight in the early nineties, thanks to the Harshad Mehta scam. Mehta was engaged in stock manipulation scheme financed by undervalued bank receipts, which his firm brokered in ready forward transactions between the banks. The amount involved in this scandal was about Rs5,000 crore rupees! There were several loopholes in the then regulatory framework, which was later on corrected but the concept was discouraged by several bodies in the country.
(Abhirup Ghosh works as researcher at Vinod Kothari & Company)


Mahanadi Coalfields sets up SPV to dispatch coal faster through railway

The SPV set up by Mahanadi Coalfields will facilitate construction of railway infrastructure to ease coal movement between mines and users. Time for Coal India to have its own rakes, and build designated rail tracks and corridors?


Only a few weeks ago, Anil Swarup, Union Coal Secretary, had mentioned that they have identified 50 railway projects that needs to be established so that India can eventually meet the projected target of 1000 million tonnes of coal.  It is not only the production that matters, but, more importantly, the issue of evacuation of coal from pit heads so that they are able to reach this fuel supply to the desired destinations in time. Transportation logistics have been a great stumbling block and this bottle neck has to be overcome to achieve desired results.
From the current level of production at about 550 million tonnes, it is envisaged that, by 2020 coal production ought to reach 1000 million tonnes to meet the growing demand. It is a daunting target and needs herculean efforts and planning to achieve the same.
Mahanadi Coalfields Ltd (MCL) is one of the subsidiaries of Coal India Ltd, the output of which is expected to reach 127 million tonnes by end of March, this year, as against 110.4 mt achieved in 2013-14. This proposed increase is most likely due to the environmental clearance of some of the mines, by expansion, at Lakhanpur and Bhubaneswar and also the forest clearance in case of Bharatpur mines.  CMD AK Sahay recently stated that MCL supplies coal to power companies in South India and Odisha, including NTPC, Talcher Thermal Power Station besides the aluminium maker, Nalco. MCL plans to reach 140 mt by 2015-16.
MCL, according to their website, has as many as 32 projects on hand, with various capacities, for which environmental clearances have been received, as early as 1990 and as late as December 2014. In the case of Sambalpur OCP, it has "consent to operate letters", but the validity is upto only 31 March 2015.  Only a few, like Kaniha OCP, Talcher UG, Nandira UG, Nataraj UG, Talcher (W) UG and Lakhanpur OCP have clearance up to 31 March 2016. These, it is hoped, will also be handled with care and expeditiously, so that the permits do not lapse!
In order to meet the ambitious projects on hand, Mahanadi Coalfields, has taken the lead, in response to the call made by the Coal Ministry, by signing an agreement with the Odisha Chief Secretary and the Union Coal Secretary to establish 2 special purpose vehicles (SPVs) - one each for Talcher and IB Valley.  More details on these SPVs are expected shortly.
Briefly, however, it may be stated that this will facilitate the construction of railway infrastructure to ease coal movement between MCL and the public sector units under Indian Railways and the State Government.  Under the SPVs, Railways are expected to acquire the land needed for SPVs. Discussions on these lines have been going on from as early as September 2012 but it is only now this has come to the agreement stage, so that work on these lines can commence. 
MCL has made this serious move.  It is in the interest of other successful subsidiaries of Coal India to follow suit and come forward to place orders for rakes on the wagon builders.  Considering the incremental increase in production envisaged why not CIL project their needs for these rakes in the next five-six years, covering both domestic miners' needs as well as those that would be required to move the imported coal. Power generators do not have much choice as they have to obtain their needs from imports that their production does not suffer.
It is time that Coal India plans and creates a SPV, to be named as Coal India Express Ltd, as an independent unit. Its main function will be to have its own rakes, build designated rail tracks and corridors, and most importantly, it needs to work out the logistics of rail, rake movement at night, without hindrance and delays, so that evacuation is as swift as the delivery at the point of discharge.
If necessary, as Railway Minister has often claimed that they lack funds, Government ought to consider and issue Railway Tax Free Bonds with attractive rate of interest, so that public can participate. Such Bonds will enable Railways also to go in for the much needed infrastructure development envisaged by them, so that they are well equipped to move upto 1,000 million tonnes in the years ahead.
MCL must also look seriously to obtain the most advanced, state of the art mining equipment, and do what it can to develop underground mines as well.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


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