The Sebi has released its report on P-Notes

The Sebi has released its report on P-Notes. It has suggested
that FIIs should not renew or issue PNs with underlying as derivatives. It also
wants sub-accounts to not issue P-Notes.

The Sebi has asked for comments on its paper by 20th October 2007.

It has further suggested that the PNs issued against derivatives should wind up
in the next 18 months, adding that there should be an unwinding of PNs issued by
sub-accounts in 18 months. It has suggested an incremental rate of 5% for issue
of P-Notes for FIIs with less than 40% of assets in P-Notes and regarding issue
of P-Notes by FIIs with assets of more than 40% in P-Notes, on
redemption/cancellation.

The Sebi has informed that the value Of PNs is up from Rs 31,875 crore to Rs
3.53 lakh crore in 3 years. It has also informed that PNs based on derivatives,
account for 30% of total PNs, at Rs 1.17 lakh crore.

The Sebi panel has said that proposals on P-Notes will be implemented urgently.

The Finance Minister has said that this is an attempt to control leveraging
flexibility of P-Notes.