The International Financial Services Centres Authority through its notification made on 18th of November 2020 had published the International Financial Services Centres Authority (Banking) Regulations, 2020 which controls the licensing requirement for setting up the banking unit.
The major highlights from the Banking Regulations comprise:
• Permitting individuals resident out of India (having net worth, not below USD 1 Million) for opening foreign currency accounts in any freely convertible currency at IFSC Banking Units (IBUs)
• Every Parent Bank would be allowed to set up only one Banking Unit in each International Financial Services Centre, as a branch.
• The accountabilities of a Banking Unit, other than the deposits raised from Qualified Individuals as well as Qualified Resident Individuals, would be exempted from Cash Reserve Ratio or any other such requirements.
• Permitting individuals resident in India (having net worth, not below USD 1 Million) for opening foreign currency accounts in any freely convertible currency at IFSC Banking Units (IBUs) towards undertaking any permissible current account or capital account transaction or any grouping thereof under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India
• It also laid down the permitted activities of IBUs which include credit enhancement, credit insurance, and sale, purchase of portfolios, involvement in factoring and forfeiting of export receivables as well as undertaking equipment leasing, which includes aircraft leasing.
• A Banking Unit would follow Know Your Customer standards, fighting of financing of terrorism and additional anti-money laundering requirements, which includes reporting requirements issued through the Reserve Bank accordingly, unless otherwise stated by the Authority.
Let’s understand what is the “International Financial Services Centers Authority”
International Financial Services Centres Authority is a unit which is set up by the Government of India in order to control all financial services in International Financial Services Centres (IFSCs). The authority controls the financial products like deposits, financial services, securities as well as financial institutions permitted by the regulators like RBI and SEBI.
The International Financial Services Centres Authority (IFSCA) was established on 27th April 2020 under the International Financial Services Centres Authority Act, 2019. Its headquarters is at GIFT City, Gandhinagar in Gujarat.
The IFSCA is an incorporated authority for the development as well as the rule of financial products, financial services, and financial institutions in the International Financial Services Centre (IFSC) in India.
Presently, the GIFT IFSC is the first international financial services center in India. Before the formation of IFSCA, the domestic financial regulators, specifically, RBI, SEBI, PFRDA, and IRDAI controlled the business in IFSC.
Conclusion:
The finance ministry had established the International Financial Services Centres Authority (IFSCA) with a key objective that the set of IFSCA will make a strong global connection as well as focus on the requirements of the Indian economy along with to serve as an international the financial stage for the whole region and the global economy altogether.
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