The Indian Financial Crime Agency seized $725 million from the bank accounts of Xiaomi’s India branch over the weekend. The state organization said the Indian department of the Chinese manufacturer sent about 55.5 billion INR to three entities based abroad in violation of foreign exchange laws.
The organization also said that “Xiaomi Technology India Private Limited” sent huge amounts of royalties (donated to other parties), allegedly all according to the instructions of the Chinese parent company. This was allegedly done for the “ultimate benefit of the Xiaomi Group” in violation of Rule 4 of the 1999 Exchange Rate Management Act. It states that no person domiciled in India may transfer any foreign exchange located outside India.
Xiaomi India issued a response, stating that all royalties and statements to the bank are legal and true. The royalties mentioned by the state agency are related to licensed technologies and intellectual property used in the Indian version of Xiaomi products. The statement also said Xiaomi India is committed to working closely with state bodies to clear up any misunderstandings.
This is not the first time Xiaomi has been hit by the Indian government, namely Xiaomi’s office in India was searched in December last year in a separate investigation for alleged income tax evasion, and on the 12th of this year former Xiaomi India chief Manu Kumar Jain was summoned to examination as part of the Administration’s investigation.
Xiaomi is not the only one hit by the Indian government, many Chinese companies have struggled in India over political tensions following the 2020 border conflict. India cited security concerns as the reason for banning more than 300 Chinese apps since then, including popular ones like TikTok, and has also tightened standards for Chinese companies investing in India (as can be seen in the example of Xiaomi).
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