Sebi, FPIs talk road map for GIFT

FPIs sought clarity from Sebi on end-to-end structures that will be allowed for participating in IFSC at GIFT

Capital market regulator Securities and Exchange Board of India (Sebi) met with the country's leading foreign investors on Monday to discuss their participation in the upcoming international finance services centre (IFSC) in Gujarat.

According to sources, FPIs sought clarity from Sebi on the end-to-end structures that will be allowed for participating in the Gift city.

"We sought clarity from Sebi on how the Fema (Foreign Exchange Management Act) will be applicable while operating out of the Gift city. Whether there will be segregation of onshore accounts and those opened for IFSC," said a senior official with a foreign fund house, who attended the meeting.

Investors also queried whether they will need to obtain an FPI license to trade in the Gift city.

"As the IFSC will be competing against international centres such as Dubai and Singapore, most foreign investors gave feedback that the KYC and taxation norms need to be simple," said a senior Sebi official.

Besides currency futures, the Gift city will allow trading in dollar-denominated index futures, non-agricultural commodities and even depository receipts of companies which are listed overseas.

"Sebi provided more clarity on products that will be allowed. FPIs were keen to know if masala bonds would be allowed to trade as they are rupee-denominated," said a source.

The meeting was chaired by the new whole time member G Mahalingam who is in charge of the foreign portfolio investor (FPI) division. IFSCs will allow trading in non-rupee denominated financial products under a more liberalised regime in terms of taxation and transaction costs.

The first IFSC centre- Gujarat International Finance Tec-city (Gift) - has been set up near Ahmedabad. Both the National Stock Exchange (NSE) and BSE are planning to set up international exchanges in the Gift city. 

BSE's operation could begin as early as next month. The market regulator in November had issued guidelines for IFSCs, where it laid down criteria and the products that will be permitted for trading.