Cabinet okays single regulator for international financial services centres

A dated file photo of Gujarat International Finance Tec-City
The Union Cabinet on Wednesday approved a unified regulating authority for international financial services centres (IFSCs) such as Gujarat International Finance Tec-City (GIFT City).   

The authority will be established through the International Financial Services Centres Authority Bill, 2019. The draft Bill was approved by the Cabinet and will now go to Parliament.

"Currently, banking and capital markets and the insurance sectors in IFSCs are regulated by multiple regulators such as the Reserve Bank of India, the Securities and Exchange Board of India, and the Insurance Regulatory and Development Authority of India. 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," said an official statement.

According to the draft Bill, prepared by the finance ministry, the proposed authority will be headed by a chairperson and will have one member each nominated by the RBI, Sebi, Irdai and the Pension Fund Regulatory and Development Authority (PFRDA). Two members will be nominated by the central government. There will be two other full-time or part-time members.

An IFSC like GIFT City tries to provide a business and regulatory environment comparable to any leading international financial centre in the world. This is aimed at providing Indian corporate entities with easier access to financial markets and also attracting services and transactions that are now carried out in offshore locations.

The need for a separate unified regulator arose after the existing regulators expressed concerns that transactions in GIFT City can have an impact on the domestic markets. 

"The establishment of a unified financial regulator for IFSCs will result in providing a world-class regulatory environment to market participants from an ease of doing business perspective. This will provide stimulus for further development of IFSCs in India and enable bringing back financial services and transactions that are currently carried out in offshore financial centres," said the official statement. 

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