India’s 1st IFSC in GIFT City: The Global In-House Centres Regulations
What is IFSC?
An International Financial Service Centre is a jurisdiction that provides world class financial services to non-residents and residents, to the extent permissible under the regulations, in a currency other than the domestic currency of the location where the IFSC is located.
India’s First IFSC
The Government of India established International Financial Services Centres Authority in April 2020 under the International Financial Services Centres Authority Act passed by the Indian Parliament. For the first time, the regulatory powers of four financial services regulators in India, namely, Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory Development Authority of India (PFRDAI), have been vested in IFSCA with respect to regulation of financial institutions, financial services and financial products in the IFSC, making it a unified regulator for the International Financial Services Centre in India. Approved by Government of India as an International Financial Services Centre (IFSC) at GIFT City, the IFSC reinforces India’s strategic position as a global hub for financial services. Apart from providing a global financial platform, it provides easy access to the Indian economy, which is amongst the largest and fastest growing economies in the world and connects ~30 Mn strong Indian diaspora globally to India through the IFSC.
The Global In-House Centres
The recent decades have witnessed the growing centrality of international financial services in the larger financial sector. In the Indian context, this has been even more important as the country is not only one of the world’s largest consumers of international financial services but also holds a massive, mostly untapped potential to emerge as a global hub for international financial activity owing to its vast size and strategic location.
The IFSC at Gujarat’s GIFT City is the product of the realisation and endeavour to position India at the heart of international financial transactions, regionally as well as globally. Towards this end, the role of global in-house centres (GICs) in accelerating digitisation and economic development, cannot be understated. In India, GICs have been instrumental in creating a large talent pool of highly skilled workforce equipped with the best digital knowledge available.
To this effect, the IFSCA notified the IFSCA (Global In-House Centres) Regulation, 2020 to provide an institutional framework for recognising and operationalising the GICs situated at GIFT City IFSC. The government of India, on the recommendation of the IFSCA, notified GIC as a financial service to provide services pertaining to financial products and services.
The GIC regulations issued by the IFSCA have the potential to place the GIFT-IFSC among the leagues of leading global fintech cities like Singapore and London, while generating significant employment opportunities for the workforce.
Regulatory regime for GICs in GIFT IFSC
1. The GIC in GIFT IFSC can provide support services, directly or indirectly, to the following entities within its financial service group, including but not limited to:
- Banks, non-banking financial companies (NBFCs)
- Financial intermediaries
- Investment banks
- Insurance companies
- Re-insurance companies
- Brokerage firms and Funds
- Stock exchanges
- Clearing houses
- Depositories and Custodians
2. The applicant entity shall exclusively cater to its financial services group.
3. The support services should be for the purpose of carrying out a financial service in respect of a financial product.
4. GICs can conduct its business in any mode permitted by the IFSCA, including the branch mode.
Key benefits of setting up GIC in GIFT IFSC:
- Globally competitive tax regime
- Lower operational costs
- Availability of large talent pool
- Ease of doing business
- Access to state of art infrastructure
Currency and Mode of Conducting Business
- A Global In-House Centre shall deal in freely convertible foreign currency only, provided that it may defray its administrative expenses in INR by maintaining an INR account as may be specified by the Authority.
- A Global In-House Centre may conduct its business in any mode permitted by the Authority, including branch mode.