FSDC discusses ways to ease inter-regulatory issues at IFSC-GIFT City

Council held meeting in Mumbai on Thursday, chaired by Union Finance Minister Sitharaman

The Financial Stability and Development Council (FSDC) on Thursday discussed ways to ease clearances, pending matters, and inter-regulatory communication at the International Financial Services Centre-GIFT City (IFSC-GIFT City) in Gujarat, Business Standard has learnt.

The IFSC-GIFT City is a regulatory sandbox, regulated by IFSC Authority (IFSCA).

An official aware of the deliberations at the meeting held in Mumbai said that while all financial institutions operating in GIFT City come under the ambit of IFSCA, in certain cases other regulators such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) also have oversight.

“If a foreign-regulated bank, financial institution or entity has an office in the GIFT City, and from that branch it wants to conduct business in India, then the relevant regulatory authority comes in. In the same manner, if an Indian financial institution wants to set up an office at GIFT City, permissions have to be granted by the respective regulators,” the official explained.

Depending on the proposal, the IFSCA may ask other regulators to grant some special dispensation or relaxation for financial institutions operating out of GIFT City on a case-to-case basis.

The person said the FSDC endeavours to ease such inter-regulatory issues. “The FSDC is the platform for communication between regulators to deal with such issues. It works to constantly ease these processes,” the official said, adding there were discussions to further streamline these overlaps.

The meeting was chaired by Union Finance Minister Nirmala Sitharaman and was attended by the RBI Governor Shaktikanta Das; Union Finance Secretary T V Somanathan; Ajay Seth, secretary, Department of Economic Affairs; Revenue Secretary Tarun Bajaj; Chief Economic Advisor V Anantha Nageswaran; Sebi Chief Madhabi Puri Buch; Insurance Regulatory and Development Authority chief Debasish Panda; and IFSCA Chairman Injeti Srinivas, and other officials.

The IFSC-Gift City is one of Prime Minister Narendra Modi’s pet projects since his days as Gujarat Chief Minister. On July 29, Modi inaugurated the India International Bullion Exchange (IIBE), India’s first such exchange. India being one of the world’s largest markets of gold, the setting up of the exchange is expected to lead to transparency and standardisation of the market.

Units functioning out of the IFCI already receive tax exemption to the tune of 100 percent for 10 consecutive years out of 15 and a range of other concessions. The Centre has been monitoring the progress made by GIFT City at the highest levels after putting in place an effective framework for its regulation.

The number of entities onboard GIFT City between 2015 and 2019 was 140. That number rose to 265 in less than two years since. JP Morgan Chase & Co., Punjab National Bank and KPMG International are among the financial companies looking to set up base in Gift SEZ, media reports have said. The number of entities operating out of GIFT City could soon cross 280.

The services that GIFT City, which is a special economic zone, offers include fintech, alternative investments for green energy, aircraft leasing and financing, gold bullion exchange, insurance and reinsurance, global in-house centres for financial institutions, listing and trading of real investment trusts, investment banks and rating agencies. There are proposals to soon have marine leasing and financing as well.