Custodian Banks reanalyze their High-  Risk list
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Global Banks have prepared a list of 25 countries labeling them as high-risk for investment and financial operations. The high-risk list consolidated by the custodian banks (part of the banks involved in putting together the list) have received massive backlash from various countries. Facing this tremendous pressure, the custodian banks expressed their intention on reanalyzing their high-risk list.

The high-risk list by Global Banks

Five global banks have put together a high-risk list of 25 countries. The banks have submitted the same to SEBI and Capital Market Regulator Securities. The list includes the financial hubs with major international investors such as Mauritius, Cayman, and UAE. The list has caused an outrage in the banking and investment sector.

Facing the criticism of the masses, the British bank HSBC has expressed its opinion of reassessing the list of 25 high-risk countries. Standard Chartered, a renowned banking MNC, has also shared its concerns on the high-risk list of countries. Local custodian banks such as Kotak, HDFC, ICICI, and few more, are going to meet and discuss the issue. According to the insider’s information, the banks wish to remove Mauritius from the list.

The repercussions of being labeled as a high-risk country

If a country is marked as high-risk, the investments arriving through these channels will be subjected to extreme scrutiny. Although there is no direct oppression of financial activities involving these countries, as of yet, the investment operation from these countries will least take more time to clear all the stringent scrutiny of the authorities.

In the new rules of SEBI, the NRIs and PIOs (Person of Indian Origins) will face a wall if they try to
participate in the offshore fund investing in India.

The stance of SEBI, the better alternative and the blow to the NRI investors

Despite the noise made on the financial frontiers, SEBI is maintaining a silent stance. Experts suggest that instead of restriction on the high-risk countries, SEBI can make use of a strict KYC policy. The SEBI’s new rules restrict NRIs and PIOs from becoming ‘beneficial owners’ (BO) of FPI (Foreign Portfolio Investors). According the rule, the entry barrier would be stiffer for NRI investors.

At present, the strict rules against the high-risk countries may seem like a funding block. However, the government implements such measures for the betterment of Indian economy. The actual pro and cons of this measure is still a debate for the future.

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Babara Peeples
Babara Peeples

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