The finance ministry's directive on voting rights on American depository receipts (ADR) and global depository receipts (GDR) is expected to affect the management of companies and private banks where the custodian votes are transferred to the management. |
The revised rules for GDRs issues by the finance ministry on yesterday stipulated that voting rights be in line with the Reserve Bank of India norms or the Companies Act rules. |
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According to sources, the move would help check any possible misuse by the management. Besides, officials pointed out, the holdings of the custodians was in excess of the 10 per cent cap prescribed by the Reserve Bank of India. |
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The Banking Regulation Act also prescribes that the voting rights of foreign investors in Indian private banks be limited to 10 per cent irrespective of the shares owned by them. |
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"It was quite possible that the management of a bank or a company, without holding any shares could influence a particular decision," said an official. |
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Officials added that the move to insist on domestic listing before an ADR or GDR issue was aimed at ensuring that companies did not route unaccounted money back into the Indian economy. |
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Similarly, by prescribing that those barred from raising funds in India will not be allowed to issue ADR, GDR or foreign currency convertible bonds, the government was trying to ensure that those accused in the stock scam did not raise funds abroad. |
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