Seeking to soothe jittery investors, the Government on Monday said it would not react in a 'knee- jerk' manner to SIT recommendation on checking inflow of overseas investments via P-Notes, assuring that no action will be taken which adversely impacts the investment climate.
Finance Minister Arun Jaitley said a considered view would be taken on the Supreme-Court appointed Special Investigation Team (SIT) recommending stronger measures to identify owners of Participatory Notes (P-Notes) to check black money.
The comments came as stock markets slumped over 551 points and rupee slid to 64.15 to a dollar as investors saw any Government action against P-notes as hurting genuine foreign investments.
"It is too early to say what view the Government would take. But it will certainly not take any such action in a knee-jerk reaction, particularly one which has any adverse impact on investment environment," Jaitley told reporters in his Parliament House Office.
Separately, Revenue Secretary Shaktikanta Das said there is no need to 'panic' and the Finance Ministry will take a view on the SIT suggestions only after consultations with Sebi, RBI and other institutions.
"At the moment there is no need to panic. We will take views after consultation with stakeholders including Sebi, RBI and related institution. There is no need for markets to react in any particular manner," he said.
The SIT had last week suggested to Sebi to put in place regulations that will help identify individuals holding P-Notes or offshore derivative instruments (ODIs), and take other steps required to curb black money and tax evasion through the stock market route. P-Notes are used by a large number of foreign investors to park funds in the equity market without disclosing their identity to the market regulator Sebi.
Jaitley said the recommendations made by the SIT on black money will come up to the Government which "will apply its mind in due course keeping in mind the investment environment of the country as also the objective behind the SIT recommendations and then take a final view on the matter."
Till a few years ago, P-Notes used to account for more than 50 per cent of total FII investment, but their share has fallen over the years after Sebi tightened disclosure norms and other related regulations.
Investments through P-Notes into India's capital market had touched a 7-year high of Rs2.85 lakh crore in May. It was Rs2.75 lakh crore at the end of June.
P-Notes make up mostly 15-20 per cent of the total FII investment in India since 2009. While it used to be much higher - 25-40 per cent - in 2008. It was as high as over 50 per cent at the peak of stock market bull run in 2007.
The Revenue Secretary too sought to calm the jittery markets, saying there should be no uncertainty in market as presently status quo prevails.