What is the International Financial Services Centres Authority (IFSCA)

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2. What is the International Financial Services Centres Authority (IFSCA)? Why is it needed? What are its functions? The International Financial Services Centres Authority (IFSCA) was established on April 27, 2020, under the International Financial Services Centres Authority Act, 2019. It is headquartered in GIFT City, Gandhinagar, in Gujarat. The IFSCA is a unified authority for the development and regulation of financial products, financial services, and financial institutions at the International Financial Services Centre (IFSC) in India. Before the establishment of IFSCA, the domestic financial regulators, namely, the RBI, SEBI, PFRDA, and IRDAI, regulated the business in IFSC. The establishment of IFSCA The dynamic nature of business in the IFSCs requires a high degree of inter-regulatory coordination within the financial sector. Thus, the IFSCA has been established as a unified regulator with a holistic vision to promote ease of doing business in the IFSC and provide a world-class regulatory environment. The primary objective of the IFSCA is to develop a strong global connection, focus on the needs of the Indian economy, and serve as aninternational financial platform for the entire region and the global economy as a whole.

3. Role of IFSCA The IFSCA is an authority to develop and regulate financial services, financial products, and financial institutions at the International Financial Services Centre (IFSC) in India. It will regulate the nature of the business that will be transacted in the IFSC and the functioning of the entities involved with transacting business in the IFSC. The IFSCA will not only regulate but also develop financial services and products with the aim of making IFSCs more attractive to overseas investors. The IFSCA's key roles and responsibilities include: • Regulation and development of financial services in the IFSC The IFSCA will be the sole regulator for all financial institutions operating in the IFSC. It will regulate and develop financial services and products to attract overseas investors and corporations to invest in India. The IFSCA will also create a favourable business environment for the development of financial services and products, including a framework for fintech startups to operate in the IFSC.

4. Coordination with domestic financial regulators The IFSCA will work closely with domestic financial regulators such as the RBI, SEBI, PFRDA, and IRDAI to ensure a seamless regulatory environment. It will coordinate with these regulators to ensure that there are no conflicts of jurisdiction between them and IFSCA. • Promoting ease of doing business with the IFSC The IFSCA aims to promote ease of doing business in the IFSC by streamlining regulatory processes, simplifying compliance procedures, and reducing regulatory overlaps. The IFSCA will create a single-window clearance system for all financial services and products offered in the IFSC. • Creating a world-class regulatory environment The IFSCA aims to create a world-class regulatory environment that is comparable to the leading financial centres such as London, New York, and Singapore. It will ensure that the regulatory environment is stable, transparent, and predictable, with a focus on investor protection.

5. Developing a global connection The IFSCA aims to develop a strong global connection by promoting IFSCs as a destination for overseas investors and corporations. It will work with international organisations such as the Financial Stability Board (FSB), International Organisation of Securities Commissions (IOSCO), and Basel Committee on Banking Supervision (BCBS) to promote IFSCs as a viable alternative to existing financial centres. • Fostering innovation and technology adoption The IFSCA aims to foster innovation and technology adoption by providing a regulatory environment that is conducive to the development of new financial services and products. It will work with fintech startups to promote innovation and technology adoption in the IFSC. IFSCA Members The IFSCA consists of nine members appointed by the Government of India, as perthe International Financial Services Centres Authority Act, 2019. The members of IFSCA include a chairperson, one member each from RBI, SEBI, PFRDA, and IRDAI, two members from the Finance Ministry, and two members appointed on the recommendation of a selection committee. The term of each member is three years, subject to reappointment. The IFSCA Chairperson is appointed by the Central Government on the recommendation of a Selection Committee consisting of the Cabinet Secretary, the RBI Governor, and the SEBI Chairman. The members of the IFSCA play a critical role in the development and regulation of financial products, services, and institutions in the IFSC in India.

6. Benefits of IFSCs IFSCs can serve many purposes, including fundraising, global tax management, and corporate treasury management. They offer a world-class regulatory environment, which makes them attractive to investors. An IFSC in India can also provide enhanced access to global financial markets for Indian corporations. Moreover, entities set up in IFSCs can avail themselves of many tax benefits. For instance, the income earned by units in an IFSC is taxed at a concessional rate of 9%. IFSCs can also help in the creation of fintech hubs. With a large number of Indians outside India working in fintechs, India can be positioned as a fintech hub. Fintechs can be set up in IFSCs, which can be leveraged to provide innovative financial products and services. This can help in the development of a robust fintech ecosystem in India. Services provided by an IFSC An IFSC can provide various services, such as: • Fundraising services for corporations, individuals, and governments • Wealth management

7. 3.Asset management and global portfolio diversification are undertaken by pension and mutual funds, insurance companies, and other institutional investors • 4.Investment banking, mergers and acquisitions, and advisory services • 5.Trading in various financial products, such as equities, debt instruments, derivatives, and commodities • 6.Treasury management services, including forex and money market transactions • 7.Insurance and reinsurance services • 8.Fintech services, such as blockchain-based solutions, AI, and machine learning-based financial products Conclusion IFSCs have emerged as important hubs for international financial transactions. They offer world-class regulatory environments, which attract investors. With the establishment of the IFSCA, India has taken a significant step towards developing IFSCs in the country. The IFSCA is a unified regulator that aims to promote ease of doing business in IFSCs and provide a world-class regulatory environment. With its focus on developing a strong global connection and serving as an international financial platform, the IFSCA is expected to play a crucial role in the development of IFSCs in India. It is also expected to enhance India's global competitiveness and help in the creation of a robust fintech ecosystem in the country.

8. FAQs What are IFSCs? IFSCs are jurisdictions within a country that offer financial services to clients outside the domestic economy. They provide an international financial platform for various financial services like banking, insurance, asset management, and capital markets. Why were IFSCs established? IFSCs were established to provide an international financial platform for cross-border trade transactions. They allow companies to carry out these transactions more efficiently and effectively. What is the role of IFSCA? The role of IFSCA is to regulate financial services in IFSCs. It ensures that the financial institutions operating in IFSCs comply with the regulations, guidelines, and standards set by the authority. What are the functions of IFSCA? The functions of the IFSCA include regulation, licensing, supervision, investor protection, and dispute resolution. Where is IFSCA headquartered? IFSCA is headquartered in the Gujarat International Finance Tec-City (GIFT City), which is India's first IFSC. What are the benefits of establishing an IFSC in India?

9. Establishing an IFSC in India provides various benefits, including a favourable tax regime, streamlined regulatory procedures, access to a large pool of skilled professionals, and a strategic location at the crossroads of major trade routes. What types of financial services are permitted in IFSCs? IFSCs allow for a wide range of financial services, including banking, insurance, asset management, securities trading, and commodities trading. What are the requirements for setting up a financial services business in an IFSC? Financial services providers must obtain a license from the IFSCA in order to operate in an IFSC. The application process involves meeting certain eligibility criteria, submitting a detailed business plan, and undergoing a due diligence process. What are the regulatory requirements for financial services providers operating in IFSCs? Financial services providers operating in IFSCs must comply with all applicable laws and regulations in India, including those related to taxation, securities regulation, and anti-money laundering.

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