The curious case of Ramalingam
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Of what use could be a dollar-denominated US security within the geographical limit of India? Tamil Nadu business man Ramalingam may have been naïve in offering the papers as collateral for his proposed business venture, but the discovery shows the sophistication Indians with spare cash are showing to hedge their interests.
Assume there is an offshore account that is getting too many enquiries from the KYC norms countries are putting in place. A useful play would be to transfer the ownership of the money to a shell company which can then easily invest in US government bonds. But to ensure that the money is not cashed out by accomplices, a fool-proof method is to keep the physical securities with self. Considering that Ramalingam was not in the habit of travelling abroad, obviously there would be a missing link in this line of thought.
The other aspect of the story is the choice of instruments. Even though India does not have capital account convertibility, given that the US papers are the most liquid instrument in the world, the choice is impeccable. It also is interesting that though the import of legitimate gold into India has risen sharply in the past two years, it has tapered off somewhat now. The spike in imports timed nicely with the controversies that started swirling around connected people in some of the large rip offs. A bond instrument denominated in dollar removes all the hassle of preserving the metal safe and could be an important consideration.
Lastly, there is the issue of cashing out of these instruments. A trip abroad with the paper to sign up as a participatory note for a financial market company can easily return the amount back to cash that can easily travel back to the shell company.