The GIFT International Financial Services Centre ("GIFT IFSC") established in Gandhinagar, Gujarat is India's first international financial services centre with the intent of catering to global MNCs and financial institutions in alignment with international standards of business. To ensure that utmost benefits can be provided, the entire zone has been equipped with world class infrastructure akin to global standards. This newsletter navigates the journey of GIFT IFSC, and the International Financial Services Centres Authority ("IFSCA") set up under the International Financial Services Centres Authority Act, 2019.
IFSCA as a unified regulator is also head quartered at GIFT IFSC and is committed to providing a sound and well-structured regulatory environment by providing a single window clearance system. The IFSCA has been able to achieve this through unification of the powers previously held by four separate regulators: Reserve Bank of India ("RBI"), Securities and Exchange Board of India ("SEBI"), Insurance Regulatory and Development Authority of India ("IRDAI"), and Pension Fund Regulatory and Development Authority of India ("PFRDAI").
We are providing transactional updates including a bird's eye view on legal and regulatory updates related to the GIFT IFSC.
Incentive provided by IFSCA for filing of Environmental Social and Governance (ESG) Funds by Registered Fund Management Entities (FMEs) at GIFT IFSC
September 27, 2024 – To meet its ambitious net zero target by 2027, India requires approximately USD 10 trillion. In support of this goal, the IFSCA is offering incentives for FMEs to set up ESG funds at GIFT IFSC. It is to be noted that International Banking Units in GIFT IFSC have distributed more than USD 1.5 billion green/sustainable loans in the financial year 2023-2024.
Further, to encourage channelisation of green private capital via the fund route, IFSCA has waived filing fees for the first 10 ESG funds submitted by registered FMEs at GIFT IFSC. These incentives demonstrate IFSCA's commitment to attracting fund managers to GIFT IFSC and promoting ESG principles. As sustainable finance grows globally, this initiative positions GIFT IFSC at the forefront of the trend.
Source: GIFT IFSCA website [Press Release dated September 27, 2024]
Trading and Settlement of Sovereign Green Bonds (SGrBs) in IFSC
September 24, 2024 – The Government of India has been issuing Sovereign Green Bonds ("SGrBs") to raise funds for green infrastructure projects. On August 29, 2024, the RBI introduced a scheme for trading and settling SGrBs in the IFSC, aimed at expanding non-resident participation in these bonds.
The key highlights of the scheme include:
- Eligible Investors: The scheme permits persons resident outside India, as defined under section 2(w) of the Foreign Exchange Management Act, 1999, to invest in SGRBs within the GIFT IFSC, except those from high-risk jurisdictions identified by the Financial Action Task Force (FATF). Further, IFSC Banking Units "(IBUs") of foreign banks that do not have a branch or subsidiary licensed to undertake banking business in India are also eligible to participate.
- Primary and Secondary Market Participation: Investors can engage in primary auctions of securities conducted by the RBI and trade in secondary market within the IFSC. However, IBUs are restricted from participating in primary auctions but can conduct transactions in the secondary market. Also, the transaction between two eligible IBUs shall not be undertaken under this scheme. The eligible investors inter alia shall open a demat account with a depository participant of authorized depository to participate in the said primary auctions of securities conducted by RBI.
- Reporting requirements: The scheme requires the authorized clearing corporation to report secondary market transactions to the Clearing Corporation of India Limited (CCIL) or any other designated agency within 3 (three hours) of the close of trading hours for the eligible securities. Additionally, the authorized depository must submit an end-of-day statement of holdings and details of beneficial owners, based on investor-provided information, to the RBI in the manner and format specified by the RBI.
- Compliance with AML: The RBI mandates that eligible participants such as broker-dealers, custodians, clearing members, depository participants registered with IFSCA, and eligible IBUs must conduct KYC, client due diligence, and other checks on eligible investors as per IFSCA (Anti-Money Laundering, Counter- Terrorist Financing and Know Your Customer) Guidelines, 2022 dated October 28, 2022 as amended from time to time.
Source: GIFT IFSCA website [Circular dated September 24, 2024]
IFSCA Issues Public Caution on Unregistered Broker Dealers
September 20, 2024 – The IFSCA has issued a warning regarding unregistered entities masquerading as Broker Dealers in the GIFT-IFSC, particularly targeting the public through social media to promote questionable investment schemes with promises of high returns. To safeguard investments, the IFSCA recommends the following:
- Verify Registration: Check the registration status of Broker Dealers on the official IFSCA website, which provides a comprehensive list of all registered entities.
- Exercise Caution: Be cautious of Broker Dealers offering unusually high returns, demanding upfront payments, or showing reluctance to provide documentation of their registration.
- Report Suspicious Activity: If you encounter any Broker Dealers claiming IFSCA registration without valid proof, refrain from engaging with them and report the matter to the IFSCA immediately.
Source: GIFT IFSCA website [Press Release dated September 20, 2024]
IFSCA's Single Window IT System Launched by Hon'ble Prime Minister
September 16, 2024 – Prime Minister Narendra Modi launched the IFSCA's first Single Window IT System (SWIT System). This digital platform simplifies the application process for businesses in GIFT IFSC by consolidating various approvals from multiple government agencies into one streamlined interface.
The key features of the SWIT System include:
- A Common Application Form (CAF).
- API integration with the Special Economic Zone (SEZ) online system for approvals.
- Interfaces with key financial regulators (RBI, SEBI, IRDAI) for No Objection Certificates (NOCs).
- GST registration capabilities.
- Real-time data validation for PAN, DIN, and CIN.
- An integrated payment gateway.
- A Digital Signature Certificate (DSC) module.
The SWIT System aims to enhance the ease of doing business by reducing turnaround times and costs for applicants.
Source: GIFT IFSCA website [Press Release dated September 16, 2024]
IFSCA releases consultation paper on revised 'Framework for undertaking Global/Regional Corporate Treasury Centers activities by Finance Company/Unit in IFSC'
September 12, 2024 – The IFSCA has released a consultation paper inviting public and stakeholder feedback on proposed revisions to the "Framework for undertaking Global/Regional Corporate Treasury Centers ("GTC") activities by Finance Company/Unit in IFSC." This initiative aims to enhance the operational environment for treasury centers in GIFT IFSC, boosting their global competitiveness.
A treasury center acts as an in-house bank for multinational corporations, managing central funds and optimizing resources across their entities. Its main functions include intra-group financing, cash and liquidity management, and financial advisory services.
Originally established on June 25, 2021, the initial Framework outlined guidelines for setting up GTCs in GIFT IFSC. The proposed revisions intend to broaden the scope of permissible activities, incorporate international best practices, and simplify regulatory compliance. The consultation paper is open for comments until October 2, 2024
Source: GIFT IFSCA website [Public Consultation September 12, 2024]
IFSCA issues guidelines for listing of debt securities on recognized stock exchanges in IFSC
September 11, 2024 - The IFSCA has introduced the IFSCA (Listing) Regulations, 2024, establishing a framework for listing securities on international exchanges within the GIFT IFSC. A circular dated September 11, 2024, outlines the new requirements for listing debt securities on recognized stock exchanges.
Key points include:
- Regulation 72 mandates that issuers obtain a credit rating from an IFSCA-registered agency or a foreign-recognized one.
- Starting October 1, 2024, this credit rating requirement will apply to all debt securities proposed for listing, streamlining the process for entities nearing debt listing.
These changes aim to enhance the IFSC's attractiveness for listing debt securities and bolster its global financial standing.
Source: GIFT IFSCA website [Circular dated September 11, 2024]
IFSCA Grants Provisional Registration to Indian Renewable Energy Development Agency Limited ("IREDA") Global Green Energy Finance IFSC Limited
September 10, 2024 - IFSCA has granted provisional registration
to IREDA Global Green Energy Finance IFSC Limited, a wholly owned
subsidiary of IREDA, as a finance company at GIFT City.
Source: GIFT City website
IFSCA clarifies net worth maintenance requirement for Capital Market Intermediaries in GIFT IFSC
September 5, 2024 – The IFSCA has issued guidance on the requirement for Capital Market Intermediaries ("CMIs") to maintain net worth as per Chapter II, Regulation 6 of the IFSCA (Capital Market Intermediaries) Regulations, 2021. The circular emphasizes that any CMI failing to meet the net worth requirement will be prohibited from undertaking any new or existing business activity in the GIFT IFSC until the net worth is restored.
Source: GIFT IFSCA website [Circular dated September 05, 2024]
IFSCA releases consultation paper on proposed amendments to the IFSCA (Investment by IFSC Insurance Office) Regulations, 2024
September 03, 2024 – The IFSCA has issued a consultation paper inviting comments and suggestions from the general public and stakeholders on the proposed amendments to the IFSCA (Investment by International Financial Service Centre Insurance Office) Regulations, 2022. IFSCA had notified the said regulation on January 12, 2023.
The proposed amendment is intended to address specific requests from stakeholders regarding the investment of premiums received against Unit Linked Insurance Policies ("ULIP") products and aim to align the IFSC Insurance Offices ("IIOs") investment framework with recent amendments in the Insurance Regulatory and Development Authority of India (IRDAI) (Re-insurance) Regulations, 2023. In view of the same, the proposed amendment will provide separate limits of exposure for investment to the IIOs that will be investing the retained premium in Domestic Tariff Area. The consultation paper was open for general public comments till September 23, 2024. The goal is to enhance clarity for IIOs regarding their asset investments in the DTA.
Source: GIFT IFSCA website [Public Consultation September 03, 2024]
IFSCA releases consultation paper on the listing of Commercial Paper ("CP") and Certificates of Deposit ("CD") in the GIFT IFSC
September 02, 2024 – IFSCA has received requests to introduce new products on recognized stock exchanges in the GIFT IFSC. The Listing Regulations provide a framework for listing CPs and CDs under Regulations 80 and Regulation 81, respectively. Further, as per Regulation 130(2) of the Listing Regulations, the requirements stated under Regulations 80 and 81 of the Listing Regulations, is to be finalized following public consultation and IFSCA approval.
Consequently, the IFSCA has issued a consultation paper seeking comments and suggestions from the general public and stakeholders regarding the proposed circular on the listing of CPs and CDs on recognized stock exchanges within the GIFT IFSC. The consultation paper was open for general public comments till September 17, 2024. The goal is to establish clear regulatory requirements that facilitate efficient and transparent issuance of these instruments, ensuring that investors have access to sufficient material information for informed decision-making.
Source: GIFT IFSCA website [Public Consultation September 02, 2024]
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
