Govt wants banks to spot suspicious foreign deals

MUMBAI (TIP): The government has put payments made by Indian companies to foreign vendors and routed through Indian banks under the scanner after the Supreme Courtappointed Special Investigation Team (SIT) on black money and the Central Bureau of Investigation expressed fears over possible misuse. Bankers said that a few days ago, department of financial services in the finance ministry has dashed off a letter, asking banks to look into all such payments made to foreign entities and report those which they viewed as suspicious.

A top-level bank executive added that payments made to Chinese companies and those involving power equipment had been flagged. A senior government official too confirmed that letter had been sent but did not share details. “We are trying to identify suspicious transactions as there are fears of over-invoicing,” the officer said, while refusing to disclose the future course of action on the grounds that it may be premature.

The SIT had pointed to overinvoicing of power equipment imports being an easy way of covering up black money in India and had identified instances with the extent of manipulation in one case estimated at around Rs 6,000 crore. Separately, the Adani Group is being investigated by CBI for alleged over-invoicing. Bankers, however, sought to play down the worries, saying that most of the transactions are clean and there may be one-off cases, which will come to light in the weeks ahead. But, coming amid the Narendra Modi government’s key poll plank of a clean-up act and a crackdown on black money, the finance ministry is not taking any chances.

Following the apprehensions expressed by the two entities, the government fears that some of the companies that deal in high-value transactions with overseas players, may have used the overestimated value of the contracts to avail of loans from Indian as well as foreign lenders. In addition, a higher project cost will also translate into higher tariffs for consumers as regulators factor in all costs, while deciding the cost of power.

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