Around two lakh companies who made suspicious deposits totaling over $1 billion during demonetization are under the government’s scanner to prevent further generation of black money and improve the investment climate in the country, the government has said.
In an interview to Bloomberg published Tuesday, Minister of State for Corporate Affairs PP Chaudhary said that his 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 told Bloomberg.
The revelations come amid a continuing government crackdown on shell firms and black money by the government. The government has already revoked permissions for over 200,000 companies and restricted their bank accounts.
"Our purpose is to increase compliance so that investors’ confidence increases in Indian companies," 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," the minister was quoted as saying in the interview.
The latest crackdown began soon after Prime Minister Narendra Modi’s Independence Day speech where he claimed that the government had identified over 300,000 shell companies and was acting against them.
Following Modi’s speech, the MCA struck off the names of 217,239 companies for failing to comply with regulatory requirements. The directors of these companies face restrictions from taking up similar positions at other companies. Explanations are also being sought from companies that have disqualified directors on their boards.
"The final list of disqualified directors may touch up to 450,000," Chaudhary said.
The ministry is conducting massive data mining exercise to trail ultimate beneficiaries of these companies. Using data analytics and artificial intelligence, the information gathered will be used to initiate 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 it’s 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."