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India’s Maiden IFSC at GIFT City: Pilot Launch of International Bullion Exchange

IFSC

India’s 1st IFSC

As one of the largest and fastest growing economies, India has been a major consumer of International financial services (IFS). The 2007 report of the committee set up by the Ministry of Finance (popularly known as the Percy Mistry Committee Report) had estimated that even under conservative assumptions, purchases by Indian households and firms of IFS will be nearly $50 billion by 2015, and could exceed $120 billion by 2025. Thus, with the objective of bringing back to India the international financial service business generated from India, and gradually emerge as an international financial services hub at the regional and global level, Government of India operationalized India’s maiden International Financial Services Centre (IFSC) at GIFT Multi Services SEZ in April 2015.

The maiden IFSC in India, offers wide spectrum of opportunities across various business segments such as Banking, Capital Markets, Fund Management, Aircraft Leasing, Insurance, etc. It is fast emerging as a preferred gateway for outbound and inbound capital flow into India.

IFSCA- The Unified Regulator

Government of India recognised that the development of financial services and products in the IFSCs would require focused and dedicated regulatory interventions. Moreover, the dynamic nature of business in an IFSC would requires a high degree of inter-regulatory coordination within the financial sector. Hence, a need was felt for having a unified financial regulator for IFSCs in India to provide world class regulatory environment to financial market participants.
 
The International Financial Services Centres Authority Act was passed in December 2019 and the IFSCA commenced its operation as a unified regulator in October 2020. The IFSCA has been vested with the combined powers of four domestic regulators namely RBI, SEBI, IRDAI and PFRDA and has a mandate to develop and regulate financial institutions, financial services, and financial products within the IFSCs in India. 

International Bullion Exchange at IFSC

Bullion business in India has been evolving and changes have been observed in the trade over the time since 7 banks were given authorization in 1997 to import gold and silver apart from Public Sector Undertakings (PSUs) such as MMTC, STC, HHEC and PEC. 

In the Budget 2020, Finance Minister of India announced for setting up an International Bullion Exchange (IBE) at the IFSC in GIFT City, Gandhinagar, Gujarat. The exchange was planned to be rolled out in 2021 subject to all regulatory approvals with the aim to create a world class market infrastructure that would connect India to the rest of the world with governance and technological prowess being its major strengths. Such an exchange will bring all the market participants at a common transparent platform of bullion trading and provide an efficient price discovery and assurance in the quality of gold and help establish India’s position as a dominant trading hub in the world. 

Pilot Launch of International Bullion Exchange – The Gateway for Bullion Imports

The Chairperson (IFSCA) launched the pilot run/soft launch on August 18, 2021 at 3:00 PM. The International Bullion Exchange is scheduled to go live on October 1, 2021, the Foundation Day of IFSCA. 

Following the announcement by Hon’ble Finance Minister in Union Budget 2020-21, the International Financial Services Centres Authority (Bullion Exchange) Regulations, 2020 were notified on December 11, 2020 which inter alia cover the Bullion Exchange, Clearing Corporation, Depository and Vaults. Government has also taken steps to notify bullion spot trading and bullion depository receipts with underlying bullion as financial products and bullion related services as financial services. 

The International Bullion Exchange shall be the “Gateway for Bullion Imports into India”, wherein all the bullion imports for domestic consumption shall be channelized through the exchange. The exchange ecosystem is expected to bring all the market participants at a common transparent platform for bullion trading and provide an efficient price discovery, assurance in the quality of gold, enable greater integration with other segments of financial markets and help establish India’s position as a dominant trading hub in the World. 

Pursuant to Memorandum of Understanding between National Stock Exchange of India Limited (NSE), the Multi Commodity Exchange of India Limited (MCX), India INX International Exchange (IFSC) Limited (INDIA INX), National Securities Depository Limited (NSDL), Central Depository Services (India) Limited (CDSL), the holding company India International Bullion Holding IFSC Ltd. (IIBH) has been created for setting up and operationalising International Bullion Exchange, Bullion Clearing Corporation and Bullion Depository in GIFT City. 

The IFSCA has approved the application by the holding company for setting up the International Bullion Exchange through the subsidiary of the holding company, “India International Bullion Exchange IFSC Ltd.”, encompassing the Bullion Exchange and the Bullion Clearing Corporation. CDSL-IFSC, a foreign depository has been designated as the bullion depository for the Bullion Exchange responsible for managing the vault manager.

Update: On December 3, 2021, Hon'ble Prime Minister Narendra Modi will inaugurate the Infinity Forum on fintech, which among other things will discuss and come up with actionable insights into how technology can be leveraged by the fintech industry for inclusive growth.