The work to establish the International Financial Services Centre (IFSC) as a credible international jurisdiction and gain from the changing geopolitical situation has picked up steam.
On Monday, the International Financial Services Centres Authority (IFSCA), the regulator for IFSC, set up a committee for international retail business development.
The seven-member committee will need to submit its report within three months. The panel has been tasked to suggest measures for developing international retail business in IFSC along with potential strategies for making IFSC attractive for international financial services.
“The committee was also tasked to draw up a roadmap for the growth of international retail business at IFSC,” said IFSCA in a press statement.
India is trying to promote IFSC, situated at the Gujarat International Finance Tech (GIFT) City, as an alternative for investors, after Hong Kong’s ability to function as a global financial centre came under a cloud when after China tightened its grip on the city, Mint had reported on 24 July.
IFSCA, which was set up in April, is working to provide an efficient and facilitative regulatory system comparable with the best jurisdictions in the world, to develop IFSC in India as a preferred global hub for international financial services.
The five major reform areas being considered is launch of more products at IFSC, extending the liberalized remittance scheme (LRS) for derivatives trading and margin payments, a one-point local dollar clearing mechanism, facilitating retail non-resident Indian participation, and doing away with requirements for setting up a broking or trading entity at GIFT.
The panel will consider ways to attract foreign firms to trade from IFSC and attract retail non-resident Indian (NRI) clients.
Guidelines of the Securities and Exchange Board of India (Sebi) require that any broker or trading member who is trading from IFSC needs to incorporate an entity at GIFT, as this will ring-fence domestic exchange trading from trading at IFSC. This requirement is a problem, say experts. “Most foreign investors already have their own foreign portfolio investor (FPI) entities incorporated outside of India, where its operations, management and infrastructure are already established and so from an administrative perspective, we do not see the incorporation of an FPI (foreign portfolio investment) in IFSC as an attractive option. Sebi-registered FPIs intending to operate in IFSC can do so without additional requirements,” said Nlioufer Lam, partner, ZBA law firm.
“Several FPIs have their own investment criteria with their investors, which set out the listing jurisdiction of instruments that can be invested in and this also limits FPIs from investing in instruments listed in GIFT City,” Lam added.
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