Union Cabinet has approved establishment of unified authority for regulating all financial services in International Financial Services Centres (IFSCs) in India. This will be done through statutory backing with enactment of International Financial Services Centres Authority Bill, 2019.
International Financial Services Centre (IFSC)
IFSC caters to customers outside jurisdiction of the domestic economy. It deals with flows of finance, financial products and services across borders. London, New York and Singapore are considered as such global or international financial centres. India’s first IFSC was set up at GIFT City, Gandhinagar, Gujarat.
Currently in India, banking, capital markets and insurance sectors in IFSC are regulated by multiple regulators, i.e. Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority(PFRDA).
Considering dynamic nature of business in IFSCs, it has necessitated high degree of inter-regulatory coordination. It also requires regular clarifications and frequent amendments in existing regulations governing financial activities in IFSCs. Hence, there was need for having unified financial regulator for IFSCs in India to provide world class regulatory environment to financial market participants.
Key features of IFSC Authority Bill
Management of Authority: It will consist of Chairperson, one Member each to be nominated by RBI, SEBI, IRDAI and PFRDA, two members to be nominated by Central Government and two other whole-time or full-time or part-time members.
Functions of Authority
Powers of the Authority: It will exercise all powers exercisable by respective financial sector regulatory (viz. RBI, SEBI, IRDAI, and PFRDA etc.) under respective Acts in IFSCs for regulation of financial products, financial services and FIs that are permitted in the IFSC are concerned.
Processes and procedures of Authority: It will follow processes and procedures which are governed in accordance with provisions of respective Acts of Parliament of India applicable to such financial products, services or institutions.
Transactions in foreign currency: This authority in consultation with Central Government will specify foreign currency in which transactions of financial services in the IFSCs shall be done.
Significance of unified regulator for IFSCs