GIFT City eyes global financial hub status with easier rules, new avenues

GIFT City is looking to strengthen its position as an international financial centre by simplifying business processes, widening access to overseas investments and creating new avenues for companies to raise capital, industry leaders said at the Business Standard BFSI Summit in Mumbai on Wednesday.

At a panel discussion titled ‘India’s Gateway to the World’, moderated by Business Standard’s Khushboo Tiwari, Praveen Trivedi, executive director of the International Financial Services Centres Authority (IFSCA); V. Balasubramaniam, MD & CEO of NSE International Exchange; Vijay Krishnamurthy, MD & CEO of India INX; and Suresh Swamy, partner at Price Waterhouse & Co LLP, discussed GIFT City’s growth, tax advantages and the measures needed to deepen its capital markets.

GIFT City’s regulatory framework now extends beyond conventional capital markets to cover banking and other financial services, Shah said. The aim is to establish a distinct identity for the centre rather than compete directly with other international financial centres. An efficient dispute-resolution mechanism, including an arbitration centre offering advantages over existing Indian centres, would support this ambition, he added.

Shah outlined steps taken to simplify business approvals. Since the International Financial Services Centre is located within a special economic zone (SEZ), entities traditionally needed approvals under both the SEZ framework and IFSCA. The government has appointed an IFSCA-nominated officer as development commissioner, reducing procedural delays and removing a separate requirement linked to the commencement of business after registration.

Fund management entities can use existing offices for multiple funds, while eligible group companies engaged in aircraft and ship leasing can share offices and documentation. A single-window system allows entities to submit one application for relevant approvals, with letters of approval issued in around 15-16 days on average.

The government is also reviewing compliance requirements and regulatory uniformity. Shah said he hoped the next six months would bring positive developments.

NSE International Exchange facilitates capital-market activity and cross-border capital flows, Balasubramaniam said. The migration of offshore Nifty trading to GIFT City in 2023 helped establish GIFT Nifty as a platform for international investors to express their views on India.

IFSCA and the Securities and Exchange Board of India (Sebi) have formed an implementation group, which includes NSE International Exchange, to develop a framework for Indian issuers seeking to raise international capital through GIFT City. Operating guidelines are expected soon, Balasubramaniam said.

Several companies and investment bankers have expressed interest, and some issuances have been filed with IFSCA, although hurdles remain.

He added that GIFT City had raised the highest amount of external commercial borrowing bonds, supplementing the country’s foreign exchange resources. Tokenisation and decentralised finance could also gain relevance as the securities market code evolves.

A clearer regulatory framework has encouraged Indian broking firms to establish a presence in GIFT City and offer retail clients access to overseas securities, Krishnamurthy said. The platform provides a regulated route for portfolio diversification and financial goals such as funding overseas education.

However, activity remains at an early stage, and inbound and outbound capital flows need to grow together. The newer framework has raised awareness among retail investors. The exchange has also launched Sensex derivatives in GIFT City and is working on plans to accelerate growth.

Krishnamurthy flagged restrictions on GIFT-based entities participating in initial public offerings (IPOs), as well as the need for a clearer route for Indian unlisted companies to raise funds through the centre. Know-your-customer requirements, including physical verification and apostille procedures, also make onboarding more cumbersome.

The framework for certain investor categories remains limited, with eligibility linked to requirements such as an Aadhaar number and an Indian mobile number.

These procedural issues need to be resolved before the market can scale up, he said. Fund management entities could introduce exchange-traded funds focused on inbound and outbound investments, while additional derivatives could widen the product range. However, stronger processes and market infrastructure are needed for exchanges to fully realise the innovation potential.

GIFT City could also support innovation in insurance, aircraft and ship leasing, and education. Despite the progress made, Krishnamurthy said the centre had a long way to go, although India’s large domestic market offered significant potential.

Regulatory clarity and certainty under domestic law are key advantages for businesses operating in GIFT City, Swamy said. He noted that provisions codified in domestic law offered greater certainty than reliance on tax treaties.

However, the industry wants a more favourable outbound tax regime, Swamy said, noting that taxes on portfolio churn can affect investor returns. He also pointed to emerging financing activities, including aircraft and ship leasing, graphics processing unit (GPU) financing and oilfield equipment financing.

On coordination between IFSCA and domestic regulators, Swamy said collaboration was necessary given India's distinct market structure. Consultation was important, with different views heard and considered as the regulatory framework evolves.