Unified regulator for GIFT City, relaxations to woo AIFs on cards

A govt source said SEZ rules are designed mainly for manufacturing and so the first financial SEZ in India at GIFT IFSC is facing regulatory issues

Last Updated : Jan 31 2019 | 2:34 AM IST

The Centre is working on measures to attract more players to GIFT City (Gujarat International Finance Tec-City) in Gujarat. A unified regulator for all financial market investments in GIFT City and relaxations for alternative investment funds are among measures that could be announced during the budget session.

Sources said the government is planning to announce changes in procedures and laws during the budget session of parliament. The proposal for a unified regulator (only for GIFT city) was made by the Reserve Bank of India two years ago. The reason was that different regulators have different views on policies relating to the domestic market, which won't be feasible for Gift city as it is an 'offshore' centre. A unified regulator at GIFT city would help smoothen the decision-making process.

Two months back, Sebi had announced regulations for alternative investment funds (AIFs) at GIFT. Since then, several private equity firms, venture capital firms, hedge funds have shown interest in setting up offices in the trade hub. However, global funds are awaiting some clarifications from the Union Ministry of Commerce and Industry (MoCI) to set up operations.

Up to seven global funds have applied on the recent Sebi announcement for AIF in the international financial services centre (IFSC).

An industry source said the issue needs urgent attention of the commerce ministry as it is holding up the set up of large funds in GIFT City. AIFs at the centre is being seen as India’s attempt to woo the fund industry. Dipesh Shah, Head (GIFT IFSC) said, “The MocCI is extremely supportive to iron out issues to enable the entry of global funds”.

A government source said SEZ rules are designed mainly for manufacturing and therefore the first financial SEZ in India at GIFT IFSC is facing issues. GIFT IFSC is trying to bring offshore financial services onshore and thereby certain criteria like Positive Net Foreign Exchange need not apply. The official quoted above said, “The ministry is aware of the issues and necessary clarification are considered on priority”. Market participants said they have applied to GIFT authorities, who, in turn, have taken up the issue with MoCI”.

Avendus Asset Management is one of the firms that have shown a keen interest in the IFSC. Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies LLP said, “We want to set up AIF in GIFT city as soon as possible. We are just waiting for clarifications from the government on some crucial issues.”

If a universal regulator had been in place, several procedural issues for AIFs may have been clarified by now, said an industry official.