ED issues Notice to Xiaomi India and 3 Banks for Alleged FEMA Violation of ₹5551cr

New Delhi (India), 10th June 2023: The Enforcement Directorate (ED) issued show-cause notices to Xiaomi, its chief financial officer and director Sameer Rao, former MD Manu Kumar Jain, and three foreign banks on Friday for alleged foreign exchange violations totalling Rs 5,551 crore.

The Foreign Exchange Management Act adjudicating body has issued show-cause notices to Xiaomi Technology India Private Limited, the two executives, CITI Bank, HSBC Bank, and Deutsche Bank AG, according to a statement from the agency.

The FEMA seized Rs 5,551.27 crore in cash of Xiaomi Technology India Private Limited lying in its bank accounts for ”unauthorised” repatriation of this amount in the pretence of royalty abroad.

A show-cause notice is issued by the FEMA following the end of the ED investigation, and once settled, the accused is obliged to pay a penalty that might be three times the amount violated.

According to the agency, the competent authority further observed that the payment of royalty was nothing more than a mechanism for shifting foreign cash out of India, which was a ”blatant” violation of FEMA laws.

According to the ED, its probe, which began last year, discovered that the company sent foreign currency equivalent to Rs 5,551.27 crore to three foreign-based organisations, including a Xiaomi group entity, under the guise of royalty.

It said, “Under the cover of various unrelated documentary façade created amongst the group entities, the company remitted this amount in the guise of royalty abroad, which constitutes violation of section 4 of the FEMA.”