HSBC is planning to wind up participatory notes (P-notes) operations in India, as tightening of regulatory framework has made the business unviable. P-notes’ attractiveness has been on the wane following tightening of the regulations and the recent double tax avoidance agreement (DTAA) with Mauritius.
HSBC is among the top five issuers of P-notes, or offshore derivative instruments, in India with a market share of more than 6 per cent at the end of last financial year. According to sources, the bank had set up an internal committee to study the developments around P-notes. The committee has suggested that incomes from P-note operations would decline in the next five years as the new norms have resulted in escalation of costs and regulatory burden.