...........While it is understandable for regulators to be nervous of fraudulent transactions/ money laundering etc., there are separate regulations to take care of such situations and the RBI and other regulators have other powers with them to regulate such transactions. In any case, the DCF regulation too effectively operates on “self-certification” since based on the valuation certificates filed with bankers the transaction can go through without any prior RBI approval. In case of transactions with related parties, Indian tax authorities, through transfer pricing and other corporate tax provisions also have powers to scrutinize such share transactions. Therefore, while we wait for guidance from RBI on this issue, it would be interesting to observe whether RBI would completely leave the discretion on pricing to corporates or would go for valuations norms which provide some more flexibility on methodology............
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