Financial sector in India is one of the important pillars for determining India’s growth. Last decade especially, we have seen unprecedented growth in India’s financial services sector. Over the period of time, various measures have been taken for developing financial sectors. Concept of International Financial Services Centre (‘IFSC’) is one of many such concepts and an initiative by Government of India to build India’s growth story. The high-powered expert committee had submitted a report on ‘Making Mumbai an International Financial Centre’ to the Ministry of Finance in 2007. Subsequently, while presenting union budget 2015-16, our then Finance Minister Hon’ble Arun Jaitley announced the establishment of Gujarat International Financial Tec-City (“GIFT city”), in Gujarat as India’s first International Financial Services Centre (“IFSC”).
GIFT city is designed as a hub for the global financial services sector. More particularly, state-of-the-art connectivity, infrastructure and transportation access have been integrated into the design of the city. This concept was materialised only in 2015 by Gujarat Government as their Greenfield Development project for implementing smart city concept. Since then, Government is taking initiatives to develop GIFT and provide various incentives to businesses in financial sector growth.
In India, GIFT is first IFSC designed to be at or above par with globally benchmarked financial centers such as Shinjuku, Tokyo, Lujiazui, Shanghai, La Defense, Paris, London Dockyards etc.
The IFSC in GIFT City seeks to bring back those financial services transactions that are currently carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions to the Indian shores. The ecosystem designed in the GIFT City facilitates a center that is having an advantage as an offshore location even though physically located in India.
Government of Gujarat has established “Gujarat International Finance Tec-City Company Limited” (“GIFTCL”) through its undertaking Gujarat Urban Development Company Limited (“GUDCL”). GUDCL facilitates urban development by assisting state government in formulation of policy, institutional capacity building, project implementation, and in raising funds from multilateral agencies for urban projects in order to achieve high living standards and growth of economic activities. It has developed and implemented and is continuously taking initiatives for development of IFSC with an objective as under:
• To realise the vision of the Government of India to emerge as a major economic power by facilitating the development of a strong base of International Financial Services in the country.
• To facilitate the implementation of the Government’s strategy for the development of a financial hub in the South Asian sub-continent.
• To position IFSC as a world-class zone for the long-term provision of office/ service accommodation and high technological, economic and commercial infrastructure.
• To bring financial service experts sitting offshore back to Indian shores and transform India as a talent hub.
In India, an IFSC has to be approved by the Central Government under the SEZ Act, 2005 and is also governed by several Financial Services regulators such as RBI, SEBI and IRDAI. On December 19, 2019, the IFSC Authority Act, 2019 (“IFSCA”) was enacted to provide for the establishment of a Unified regulatory authority to develop and regulate the financial services market in GIFT IFSC. Accordingly, it functions as a single-window for regulating activities in an IFSC in order to build investor’s confidence through consistency, transparency and clarity in policy measures. The IFSCA is empowered to exercise the powers of RBI, SEBI, IRDAI and Pension Fund Regulatory and Development Authority (“PFRDA”) in respect of financial services, financial products and financial institutions performed / located in the IFSC in the country. Further, recently the IFSCA was established by the Central Government on April 27, 2020. The IFSCA shall have its headquarters at Gandhinagar, Gujarat.
The financial institutions defined under the IFSCA are allowed to setup a unit in the IFSC. The financial institution is defined to mean a unit set up in an International Financial Services Centre and which is engaged in rendering financial services in respect of any financial product.
The list of financial product and services have been provided in the IFSCA and circulars issued therein. The following key financial institutions are permitted to set up an IFSC unit:
Presently, there are 14 banks including a foreign bank, 17 insurance firms and approximately 100 capital market entities have set up office in the GIFT IFSC. There are Two international exchanges operational from this zone and runs 22 hours a day. Details of the key institutions are as follows:
Banks: State Bank of India, ICICI Bank, HDFC Bank, IDBI Bank, Yes Bank, IndusInd Bank, Federal Bank, Kotak Mahindra Bank, Bank of Baroda, RBL Bank, Axis Bank, Indian Bank and Standard Chartered Bank, HSBC Bank
Insurance: New India Assurance (Direct Insurance), GIC Re (Reinsurance), ECGC, National Insurance and approximately 13 Insurance intermediaries.
Capital Market: India INX (International Exchange), NSE IFSC (International Exchange) along with their Clearing Corporation. Intermediaries such as Edelweiss Financial Services, IIFL Securities, Globe Capital, Philip Capital, Motilal Oswal, etc.
Alternate Investment Funds (AIF), Investment Advisors, Custodian, Depositories, Trustee companies, clearing banks are also part of the capital markets ecosystem. IT/ ITeS,
Consultancy Units: J Sagar (Law firm), Be Free, Moon SEZ Consultants, Exemplary Consultants, Cybage (IT company) and many other IT/ ITeS firms are operating out of SEZ zone for exports of various services.
In order to attract more and more participation from Indian financial institutions and foreign financial institutions, to operate from GIFT IFSC, various tax and regulatory incentives are been provided by Government of India every year.
Recently, in September 2020, India’s IFSC at GIFT made its global mark, being named among the ‘top emerging business hubs in the world’ and is considered as one amongst 15 centres which globally, are likely to gain greater significance over the next 24 months. Thus, concept of IFSC in India is set to play pivotal role in financial sector. It would be interesting to see growth of financial sector backed by technologies to play significant role in coming future.
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