|22 July, 2018

Indian banks banned from trading in cryptocurrencies

Volatility in the cryptocurrency markets globally has made policy makers cautious

Image used for illustrative purpose. buttons are seen displayed on the floor of the Consensus 2018 blockchain technology conference in New York City, New York, U.S., May 16, 2018.

Image used for illustrative purpose. buttons are seen displayed on the floor of the Consensus 2018 blockchain technology conference in New York City, New York, U.S., May 16, 2018.

REUTERS/Mike Segar

Q: There is a lot of enthusiasm about cryptocurrency transactions. I believe it is catching up in India as well. Do Indian authorities permit cryptocurrency deals?

A: The Reserve Bank of India in April this year issued a circular prohibiting banks, financial institutions and other regulated entities from providing any services relating to cryptocurrencies. The Reserve Bank directed that banks should terminate any cryptocurrency operations which they may have entered into within three months of the circular being issued, which was on April 6, 2018.

This circular was challenged before the Supreme Court of India. The court has recently rejected the petition and upheld the Reserve Bank of India's mandate as stated in the circular. The RBI had submitted to the Supreme Court during the hearing that bitcoins and other virtual currencies cannot be recognised as currency under the existing laws in India. The recent volatility in the cryptocurrency markets globally has made policy makers around the world take a cautious view, though in some countries, rules are being formulated to permit trading in secure cryptocurrencies.

Q: On returning to India, I want to get into the logistics business where I have considerable experience. I am told that trucks have to carry E-way bills. How will this help in the transportation business?

A: E-way bills are required to be carried by every transport operator which would assist the GST authorities to track movement of goods and ensure compliance, thereby avoiding leakages in revenue. The data which is available on the GST network indicates the number of trucks which are proceeding to a particular city or town.

It also helps in improving the business potential of persons who are engaged in logistics. The data which is available on the network showing the movement of trucks helps customers to book trucks for transportation of their goods. This helps logistics companies to get business readily, so that once a truck reaches a particular city or town, it need not return without cargo.

Q: For initial public offerings, the regulations are quite lax which makes it difficult for new investors like me to take an investment decision. Should the government not tighten up norms for IPOs with a view to attract new investors?

A: Issues pertaining to the capital market are generally decided by the regulator which is the Securities and Exchange Board of India. In June, Sebi reduced the time for financial disclosures in case of public issues to three years as against the period of five years earlier. Further, audited financial disclosures in the offer document of an IPO have to be made only on a consolidated basis. Audited financial statements of the issuer of the IPO and its subsidiaries have to be disclosed on the website of the issuer company.

The time required for announcing the price band of IPOs has been reduced to two working days before commencement of the issue. Before June, the time for announcing the price band was five working days. Sebi has also come down heavily on persons who are responsible for leaking price sensitive information of companies. This is to ensure that no person gets an undue advantage and that all investors get the requisite information at the same time.

The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policy.

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