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Bhargavi Zaveri & Radhika Pandey: Treat the disease, not just the symptoms

Easing the Reserve Bank of India regulation on put options would be a quick hack to solve a temporary problem. What needs to be fixed is the fundamental design of the Foreign Exchange Management Act

Bhargavi Zaveri & Radhika Pandey 

Bhargavi Zaveri & Radhika Pandey An international arbitration tribunal recently ordered Tata Sons to pay $1.17 billion to NTT DoCoMo for breach of contract the two firms. The contract in question was a put option that obligated Tata to buy the shares held by DoCoMo in Tata Teleservices at a pre-agreed price. The breach was "forced", as a Reserve Bank of India (RBI) regulation prohibited payment of a fixed return by an Indian resident to a foreigner on exercise of a put option by the latter on the former. The RBI is now said to be proposing a retrospective change in its regulation to allow such payments. The public ...

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First Published: Wed, August 10 2016. 21:46 IST
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