India's Ministry of Finance issued a notification on 27 April establishing an International Financial Services Centres Authority (IFSCA) to unify supervision over international financial services centres (IFSCs) in the country. The notification brings into effect certain provisions of the IFSCA Act 2019, which envisioned a single authority to regulate various financial activities in an IFSC.
The IFSCA will be headquartered in the Gandhinagar metropolitan region in Gujarat where the country’s first, and so far, only IFSC -- Gujarat International Finance Tec-City, or GIFT City -- is based.
The key aim of an IFSC is to bring global financial services and transactions, which are currently being rendered from overseas jurisdictions, onshore by offering a business and regulatory environment comparable to other leading international financial centres. GIFT City was initially conceived in 2007 and has been steadily growing as part of a long-term master plan that includes development of nearly 900 acres.
At present, banking, capital markets and insurance entities operating in an IFSC are regulated by the Reserve Bank of India, the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority of India.
The IFSCA will combine the powers and functions of these three regulators, as well as the Pension Fund Regulatory and Development Authority, in regulating various financial activities in an IFSC.
The establishment of a unified regulator will eliminate the need for entities to deal with each regulator separately, smoothing the process of doing business in an IFSC.
While the Finance Ministry’s notification has brought into effect certain provisions of the IFSCA Act related to the new agency's functioning, it does not yet enable the full powers envisaged. The IFSCA is effectively authorised to appoint its members and employees, set up funds, and apply tax exemptions. However, its powers to regulate financial products and services, supervise financial institutions, transact in foreign currencies, and make rules have not yet taken effect.
The IFSCA's board will comprise a chairperson, one member each nominated by the four regulators, two members from central government and two members based on the recommendation of a search committee.