In a bid to promote International Financial Services Center (IFSC) as an attractive destination for investment for global re-insurers, the government has relaxed norms for setting up shops at Gandhinagar international financial services centre.
The notification of Finance (No. 2) Act, 2019, has paved the way for reduction of the Net Owned Funds (NOF) requirement for the opening of branches of foreign re-insurers in IFSC to Rs 1,000 crore from Rs 5,000 crore.
The significant reduction in NOF requirement with the amendment in the Insurance Act 1938 is expected to attract global re-insurance companies operating in financial centres like Singapore, Dubai, Hong Kong, Malaysia, London etc. to set up branches in IFSC in India.
The above amendment is thus expected to increase the number of foreign re-insurance players in IFSC, Gandhinagar and lead to on-shoring of international insurance transactions, a senior finance ministry official said.
State-owned reinsurer General Insurance Corporation of India in 2017 opened its IFSC Insurance Office (IIO) at IFSC Gandhinagar in Gujarat, the first and only IFSC so far.
Opening an office at IFSC would allow global players to cater to the needs of customers outside the jurisdiction of the domestic economy.
Such centres deal with flows of finance, financial products and services across borders.
Finance Minister Nirmala Sitharaman in her budget speech, announced the government's intent to make India a hub for aircraft financing and leasing activities by leveraging business opportunities available in India's financial Special Economic Zones (SEZs), namely, IFSC.
Besides, the government has provided several direct tax incentives to an IFSC including 100 per cent profit-linked deduction in any ten-year block within 15 years and exemption from dividend distribution tax among others.
Together, these steps will lead to the creation of aspirational jobs in insurance and aviation finance and contribute to making IFSC a global financial and IT services hub.