Barclays Bank PLC halted creation activity for the iPath MSCI India ETN (NYSEArca: INP), after the Securities and Exchange Board of India issued a “show cause notice” stating that Barclays was not in accordance with certain reporting requirements.

The company received the notice in late September. The notice covers more than just INP; other Barclays-issued derivative products were covered as well.

Barclays says it has been cooperating with SEBI as it looks at certain aspects of its offshore derivative products.

This is not the first time that Barclays has had to suspend issuance of INP. The company also halted creations in the fall of 2007, after India decided to temporarily limit foreign investor inflows into its markets.

At that time, INP’s shares traded to a significant premium above their net asset value. Once the capital markets reopened, the shares deflated back in line with net asset value.

We may well see a repeat of 2007’s events. If there is substantial demand for INP shares, the price of those shares could rise above fair market value temporarily. Investors should generally avoid purchasing shares if that happens.

One fallout of this is that we may see increased investor flows into other India exchange-traded products. The PowerShares India (NYSEArca: PIN), WisdomTree India Earnings Fund (NYSEArca: EPI) and S&P India Nifty 50 Index Fund (NasdaqGM: INDY) all provide somewhat similar exposure to the Indian market.