Participatory Notes

Participatory notes have been evaluated as the main component of the registered FII and for those people who have interest to invest in the stock market. The P notes have a significant role in the Indian economy and 50% of investments have been done from FII. The investors can deduct the transaction cost with the help of P notes. The advantages of participatory notes are that any person can invest in the stock market without registering with SEBI. 

Concept of participatory notes 

The participatory notes can be referred as the P notes and the investors can invest in the Indian securities along with avoiding the registration in SEBI. The Foreign Institutional Investors can offer the local investors to invest in the Indian securities market with some instruments of P notes. The FII has enabled the foreign investor to invest in the Indian securities market without scheduling in the regulators of the Indian security market. It is very easy for the investors who have the investments through the P notes in the Indian economy. As per the guideline from the Indian regulators all the investments have been made for the short term of the process and it explores the funds as well.    

The feature makes P-notes that is useful for the investors 

According to the P notes India has a huge capital market and participatory notes can help to increase the revenue of the capital market. It has been reported that the investors have invested in every month and have increased the Indian stock market as well. The capital markets are responsible for classifying the financial market based on the maturity of the traded financial instruments. The maturity of the investment has lasted for only one year and the instruments that have longer maturity can be considered as the traded of the capital markets. The P notes have the facilities for the non residents of India and they have the opportunities in the Indian security market such as share market, government bonds along with corporate bonds. 

Role of P-note in Indian Economy 

The Indian stock market has been led by the FII to set the liquidity ratio in the capital market. P notes are registered and issued by “foreign portfolio investors (FPIs)” with the intention to have the attention of the overseas investors. The Special Investigation Team and the SEBI has been appointed by the Supreme court to reduce the black money and to investigate those people who are behind this suspicious situation. It might happen that the Indian government has approved the SEBI and SIT for investigating the black money through the clumps of P notes, and the FII will leave the Indian market as well. It is a very common cause in the Indian capital market and the financial market has faced a significant loss due to rigid foreign trade policy. 

Describing FIIs and norms of SEBI on P-notes 

FIIs stands for “Foreign Institutional investors’, considered as the entity that is established outside India and responsible authority to make proposals in India. Considered as an interim part of Indian Economy as there are 1450 FIIs are registered under SEBI. The below mentioned features are modified in FIIs by SEBI which enhance the positive scope for it. 

• Each foreign institutional investors can invest 10% of their equity at any company 
• 24% of the overall investment will be governed by NRIs, FIIs and OCBs.
• FIIs are now permitted to invest 100% of their portfolio in debt security under registration of SEBI. 
• Under SEBI, FIIs are permitted to include endowment, foundations, university funds, charitable trusts and so on but having a record of at least 5 years. 

As the p-notes are issued out of the peripheral region of India,hence it can not be regulated. So, SEBI introduced new norms where ‘P notes will have to be abided by Foreign Portfolio Investors Regulations”. 

Advantages and disadvantages of P-notes 

There are many advantages and disadvantages of the Participatory notes. The advantages of P notes has been described below, 

• The investors do not require to register with SEBI but the FII need to register with it. P notes can enable the huge amount of investment without disclosing the identity of the investors
• P notes has the facilities on tax saving and to take the advantage on the tax laws certain countries

The disadvantages of P notes,

• It is anonymous in nature and the investors could get the access of the Indian regulators
• P notes has also used to manipulate the stock prices of non accounted funds

Conclusion 

It can be concluded that P-notes have been used as an instrument that enables foreign investors to invest huge capital in Indian security. SEBI is the main registered section for FII for the foreign investors who want to invest in the Indian stock market. The advantages and disadvantages of P notes have also been described which indicates that it has a positive impact on the Indian Economy.