Saturday, 5 February 2011

Black money: Curious proposal to buy stake in co-op bank nixed

NEW DELHI: The Centre recently turned down a bid by a Zurich registered trust, owned by the ruling family of Liechtenstein, to pick up a stake in a Satara-based cooperative bank in Maharashtra.

LGT Venture Philanthropy Foundation (LGTVP), registered in Zurich by the royal family of Liechtenstein, had proposed to buy 49% of the equity shares of a cooperative bank - the Mann Deshi Leasing & Finance Company Private Limited - in Satara.

The proposal did not pass muster with authorities here for two reasons, including Liechtenstein's reputation as a tax haven. Situated between Austria and Switzerland, the landlocked principality has over a dozen banks where many Indians are suspected to have stashed away millions of dollars.

Officials were also alerted that the Satara bank was to get less than Rs 2.5 crore for parting with its 49% stake. The meagre amount led to the rejection of the proposal since the government maintained that it was too small an amount to merit an FDI clearance. Just why would the royal trust be interested in a bank in western Maharashtra was also something that baffled the finance ministry no end.

Officials were not convinced by Liechtenstein's explanation that it wanted to "alleviate human sufferings in remote corners of India by participating in micro-finance activities".

The official website of the bank, however, maintains that "LGTVP is investing in its non-banking finance company". It mentions Gibralter's Bonita Trust and US's Trellis Fund among those who have made similar contributions.

I-T sources said they are running a check on Indians holding accounts in LGT to ascertain whether they had anything to do with Liechtenstein's puzzling interest in the bank.

Officials have long suspected FDI coming from tax havens may actually be the money that was spirited away.

The rural bank claims all its clients are semi-literate or illiterate poor women with an average annual income of less than $1 per day. According to the FDI proposal, the bank planned to use the funds from LGTVP Capital to expand its operations.

Last November, Prince Alois of Liechtenstein had come here to enter into a Free Trade Agreement with India. On New Delhi's eagerness to conclude a double taxation avoidance agreement (DTAA) to facilitate information exchange on tax evaders, he had said it was still at an exploratory stage.

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