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Current Affairs

International Financial Services Centres Authority (IFSCA) Bill, 2019

Date: 08 December 2019 Tags: Bills & Laws

Issue

The International Financial Services Centres Authority Bill, 2019 is likely to be taken up by Parliament for discussion next week. The Bill provides for the establishment of an Authority to develop and regulate the financial services market in the International Financial Services Centres in India.

 

Background

The Bill will be applicable to all International Financial Services Centres (IFSCs) set up under the Special Economic Zones Act, 2005.
The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.

 

Details

  • An IFSC enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of financial institutions (FIs) to India by offering business and regulatory environment that is comparable to other leading international financial centres in the world like London and Singapore.

  • IFSCs are intended to provide Indian corporates with easier access to global financial markets, and to complement and promote further development of financial markets in India.

  • The International Financial Services Centres Authority will consist of nine members, appointed by the central government.

  • They will include, apart from the chairperson of the authority, a member each from the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory and Development Authority (PFRDA); and two members from the Ministry of Finance.

  •  In addition, two other members will be appointed on the recommendation of a Search Committee. All members of the IFSC Authority will have a term of three years, subject to reappointment.

Functions of IFSCA

  • The Authority will regulate financial products such as securities, deposits or contracts of insurance, financial services, and financial institutions which have been previously approved by any appropriate regulator such as RBI or SEBI, in an IFSC.

  • Regulation of any other financial products, financial services, or financial institutions in an IFSC, which may be notified by the central government; and to recommend to the central government any other financial products, financial services, or financial institutions, which may be permitted in an IFSC.

Need for IFSCA

  • The dynamic nature of business in the IFSCs necessitates a high degree of inter-regulatory coordination. It also requires regular clarifications and frequent amendments in the existing regulations governing financial activities in IFSCs.

  •  The development of financial services and products in IFSCs would require focussed and dedicated regulatory interventions.

  • It will act as a unified financial regulator for IFSCs in India to provide world class regulatory environment to financial market participants.