- Government has de-registered business licenses of over 200,000 companies
- Corporate affairs ministry probing deposits of over $1 billion
- PM Modi claimed notes ban had unearthed over 300,000 shell companies
While the government has already de-registered the business licenses of over 200,000 companies, and restricted their bank accounts, it is now working on limiting property transfers to trace any further generation of black money, said P.P. Chaudhary, junior minister for corporate affairs, in an interview last week in New Delhi.
The ministry is probing deposits of over $1 billion made by around 20,000 companies during the cash ban last year, while its Serious Fraud Investigation Office is investigating 1,505 companies for allegedly violating the Companies Act. It is examining another 809 listed companies, found untraceable by SEBI, to check their status, existence of their offices and directors, the minister said.
"Our purpose is to increase compliance so that investors' confidence increases in Indian companies," Mr Chaudhary said. "This will also attract foreign investors who would be sure that the companies they are investing in are genuine. We will have to curb shell companies if we want to increase confidence of investors in India."
After winning the 2014 election in a landslide on the promise of tackling corruption and improving the ease of doing business, Prime Minister Narendra Modi has been taking measures to prevent money laundering, counterfeiting, hoarding and tax evasion. In November last year, he withdrew 86 percent of currency in circulation aiming to crackdown on unaccounted wealth and put an end to the country's vast shadow economy. In an Independence Day speech on August 15, PM Modi claimed the move had unearthed over 300,000 shell companies.
Following his speech, the ministry of corporate affairs struck off the names of 217,239 companies for failing to comply with regulatory requirements and disqualified directors on these companies' boards from assuming directorship at other firms.
"The final list of disqualified directors may touch up to 450,000," Mr Chaudhary said. "The companies which deposited money during demonetization are being investigated using artificial intelligence".
The ministry is conducting a massive data mining exercise to trail ultimate beneficiaries of these companies. Using data analytics and artificial intelligence, the information gathered will be used to take action against the offenders, the minister said.
It's also developing a state-of-the-art early warning system using artificial intelligence that will throw up red flags and provide information in case a company's financial health deteriorates or if its transactions are suspect.
"In the absence of technology we can be reactive but not proactive," the minister said. "To be proactive it is necessary that we develop artificial intelligence."