Bank units in international finance centres welcome

By Sawant Singh and Aditya Bhargava, Phoenix Legal
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The establishment of “international finance centres” – specifically the Gujarat International Finance Tec- City (GIFT) – on par with Singapore and Dubai, received a notable mention in the finance minister’s budget speech on 28 February. The minister also mentioned that regulations for such centres would be issued in March.

Sawant Singh
Sawant Singh

While a “high powered expert committee” headed by Percy Mistry submitted a report on making Mumbai an international finance centre in 2007, the idea gathered momentum when the National Institute of Public Finance and Policy (NIPFP) presented a concept paper to the Ministry of Finance this February. The paper recognized that while the 2007 report was aimed at achieving a long-term goal, establishing special economic zones with liberalized financial laws would be an acceptable medium-term solution. The government appears to have seized on this, and has provided substantial support to this proposal, with the stated goal of recapturing Indian rupee-related business from financial centres such as Singapore and Dubai.

The financial sector regulators too have responded to this proposal with previously unseen alacrity. On 2 March, the Reserve Bank of India (RBI) issued the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, which contemplate the establishment of financial institu-tions in international financial services centres (IFSCs). Such financial institutions would be considered as “persons resident outside India” and only regulations that are specifically made applicable to financial institutions established in IFSCs would apply to them. The Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority of India (IRDAI) followed suit by issuing the SEBI (International Financial Services Centres) Guidelines, 2015, and the IRDAI (International Financial Service Centre) Guidelines, 2015.

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Sawant Singh is a partner and Aditya Bhargava is a principal associate at the Mumbai office of Phoenix Legal.

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