Hawala market operators and brokers here are flooded with enquiries since the announcement of the details of the bond issue last week. The modus operandi is as follows: Somebody wanting to whitewash his unaccounted wealth takes the fund out of the country through the hawala route. He enters into an agreement with an NRI/OCB to subscribe to the bonds and gift the bonds back to him. Presto! The money comes back clean and cheap.

RIBs are allowed to be gifted and is exempt from gift tax, wealth tax and income tax. The cost of the entire operation will work out lesser than 5 per cent, which is considerably lower than other moneylaundering options currently available.The only hassle will be the initial six-month lock-in. After the first six months RIB can be redeemed at a discount to the full-term coupon rate.

The much-hyped Voluntary Disclosure Scheme (VDIS) of 1997-98 had a cost of 30 per cent for coming clean and was able to attract nearly Rs 10,000 crore by way of fresh income disclosures. A largescale presence of unaccounted money and the earlier success of IDB as an efficient moneylaundering tool are expected to make RIB also a resounding success.

Hawala operators' successful experience with India Development Bond is luring them to take greater interest in RIB. Issue details of RIB announced by the SBI last week is almost the same as IDB, except for the coupon rate. There was great rush for IDBs from moneylaunderers towards its redemption period in early 1997. Hawala operators collected IDBs from NRI investors and sold it in the domestic market for a premium, which reached as high as 20 per cent towards the last few weeks of the redemptiondate.

According to market sources, this experience may lure hawala operators to invest directly in RIBs without waiting for money-laundering requests from resident Indians. They could then sell it (gift it) at a premium in secondary transactions, like they did for IDBs, by collecting the bonds from NRI investors.

The RIB issue is open for a maximum duration of 30 days and the SBI, the bond issuer, may decide to close it any time after the initial 10 days if it manages to get subscription of the targeted $2 billion. One cause of worry for the hawala operators is the extent of immunity from disclosures under different taxes for the receivers of gifts of RIBs, though the scheme is free of wealth, gift and income taxes. The issue prospect of IDB had explicitly promised amnesty from disclosures under wealth, income and gift taxes, apart from stating that its is free of all the above mentioned taxes.According to sources in the income-tax department, the assessing officer is empowered to seekdetails from the tax-payer about the RIBs he gets as "gift".

"We can also write to the NRI or the overseas sources, which has gifted the bonds, to satisfy ourselves," sources said, adding that any abnormality, including substantial gifts, will always be prone to investigation. However, at the moment, hawala operators seem to be confident that nothing can stop them from using this route for moneylaundering.