Gift City gains traction as more entities explore redomicile opportunities

The International Financial Services Centres Authority (Ifsca) is a keen listener to the suggestions offered by the banking, insurance, fund management, ship leasing, and other firms, and has been successful in onshoring or redomiciling to the GIFT City, industry players believe. At the Business Standard BFSI Insight Summit, Dipesh Shah, executive director, Ifsca; Ganeshan Murugaiyan, head of corporate coverage and advisory, BNP Paribas; Kunal Shah, partner, PwC; Rahul Prasad, CEO, HDFC Life International and Reinsurance; and Vaibhav Shah, head of business development strategy & international sales, Mirae Asset Investment Managers (India) Pvt Ltd, deliberated on ‘how prepared is GIFT City in giving a boost to India’s financial sector’. Edited excerpts:  

Developing an ecosystem is a long process. How has the journey been and has the GIFT City truly arrived? 

  Dipesh: There is a lot of interest in GIFT City for setting up a fund or bank. GIFT City started with the concept that we could pull an international financial centre in India. Why do people have to go to Dubai and Mauritius to do international business? It started with an important problem statement. We were exporting jobs to outside. As a concept, it looked good but it is challenging to implement. The challenge is that we are creating an offshore centre within onshore India…In the last four years, almost 600-plus firms have entered the financial centre. They are banks, funds, stock exchanges, insurance firms, and even players like aircraft and ship leasing.

 

What are the opportunities for foreign banks and such entities setting up in the GIFT City, and how important is this channel for investments in India? 

Murugaiyan: Twenty-nine foreign banks are already there and we get a lot of inquiries from our peer banks to know our experience. We should see that number easily doubling in GIFT City. In terms of products, there are certain fiscal incentives which have been given especially on the ECBs (external commercial borrowings). So, we started our branch in July but within a short period, we have already done multiple ECB transactions from GIFT City. We see a very healthy pipeline.  We will be launching a lot of other products as we go along the journey. Second, there is a lot of structured finance which will ultimately move to GIFT. The third element is renewable energy.

 

How has your experience been in the IFSC and what are the offerings that you have? 

  Prasad:  It is not just life insurance, there are retirement, pensions, and incidentally we are also licensed to do health. It is uniquely placed in that manner as very few companies are allowed to do both life and health together. We are excited about the opportunities that GIFT City presents… A lot of good plans are available for NRIs to buy but they are all rupee-denominated and if NRIs want to look at the solutions which are cross-border and truly global dollar-denominated, then it is possible from GIFT City. We see huge interest from distributors within GIFT, from lots of foreign jurisdictions who are interested in taking these products to their customers. 

Vaibhav:  We set up our office in GIFT City in October 2023. We moved the management of one of our funds from Luxembourg. The AUM was about $150 million and as we stand, it’s about $300 million. The acceptability of GIFT City has become quite large… Foreign nationals are one of the large opportunities which we can tap into. It's very difficult for a foreign national to invest in Indian markets but through GIFT City, it's one of the easiest ways. It also allows Indian residents to invest in global stocks and global bonds. 

Kunal: Probably 10 years ago, Indian fund managers had very limited options in terms of where they could pool capital. Mauritius was considered the most favoured jurisdiction to set up funds. Next, came Singapore. The opening up of the GIFT City as a platform has helped multiple Indian GPs to set up the platform in the most efficient manner.

 

There has been a trend of financial entities wanting to migrate to GIFT City from foreign jurisdictions. How is that progressing? 

  Dipesh: The first thought was how to onshore what has gone offshore; that’s where the re-domicile law was written. They went outside because there was no structure available within India. The cost of running those funds outside is so exorbitantly high in terms of legal fees itself. In GIFT City, the legal fees are in Indian Rupees and you are paying to the Indian lawyers. The re-domicile law has brought at least 15 to 20 funds which were located in Mauritius, Luxembourg, or Singapore to GIFT City, seamlessly without any issues of what happens to tax, and structure.

 

Are there any concerns about the genuineness of the flows routed through GIFT City? 

  Kunal: There are enough checks and balances both from an exchange control guideline standpoint, as well as from the IFSC guidelines. The overall interest is from overseas funds that want to access Indian liquidity. People want to tap that liquidity for raising capital which is largely to invest outside India. The second piece is more of an inbound side where people are raising capital to access Indian equities. Only a few people may want a combined strategy.

 

Any challenges, tweaks or suggestions you wish the regulator to address? 

  Murugaiyan: This is an evolving setup with development stages. We are off to a good start on the banking side. A lot of global Indian corporates have their treasury centres in a DIFC or Singapore, where they consolidate and pool their global operations. Why can’t they move the treasury centres to GIFT City at least for the Asia-Pacific jurisdiction? That would need certain rules and regulations to be looked at in terms of the movement of cash and taxation. That could be a big development.