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With the Budget announcing several measures for the Gujarat International Finance Tec-City (GIFT City), India’s first and only international finance service centre is likely to get a big boost. Injeti Srinivas, chairperson of the International Financial Services Centres Authority (IFSCA), said the Budget has helped bring regulatory clarity and has removed delays through single window approvals. In conversation with Ruchika Chitravanshi, Srinivas says the total migration of capital markets to GIFT City will take place by June end. Edited excerpts:
Q. The finance minister has taken various steps to enhance business activity at GIFT City. How do you view these measures?
A. First, we have to understand the necessity of GIFT City, and then you see why the government has taken all these steps. We want to plug into the global financial system and align with global regulatory practices. We have to be internationalised. In this context, exchange controls cannot apply. So Foreign Exchange Management Act (FEMA) is not applicable at GIFT City. We have an offshore-like jurisdiction within the country, a ‘country’ within the country.
The primary objective is to bring back international financial transactions conducted offshore by Indian entities, by giving them the best-in-class business and regulatory environment. You can also serve the rest of the world. There can be niche areas for global and regional levels. The government had done a lot on the tax regime. They have now focused more on ease of doing business and opening up some businesses and stopping export of the capital market.
Q. One of the major announcements was delegating powers under the SEZ Act to IFSCA to avoid dual regulation…
A. Many initial hiccups are behind us. Ultimately, the IFSC is likely to be delinked from SEZ. There is more ease of doing business and regulatory certainty. They have removed anomalies by bringing parity with offshore. There is preferential treatment with reference to offshore financial centres, without creating any perverse arbitrage. In some areas they may have to give preferential treatment. We will amend the IFSC Act. It will become a code that is self-contained.
Q. Union Finance Minister Nirmala Sitharaman has also permitted acquisition financing by IFSC units of foreign banks…
A. These are opportunities. The organised sector is growing, there is more activity in mergers and acquisitions, restructuring. Gradually, things are moving forward.
Through the single window clearance we will remove delays. There will be a single interface for registration and approval from IFSCA, SEZ and other authorities.
Q. How will the data embassies work?
A. They can happen in two ways. For example, a country may have space constraints and they may want to have a data centre in another country but within their control. These data centres could be for disaster recovery or a critical database.
Q. How do you see these measures translating on ground?
A. There is traction. There is clearly visible momentum. Ten foreign banks have come to GIFT City and another five-seven are in the process of applying. We will add another 25 in the next two years — all foreign banks. The fund industry has picked up. The reinsurance business has started taking root. These are early days for pension. By June end, we will have total migration of the capital markets. That will be $10 billion migrating under NSE IFSC- SGX Connect. We have reasons to be optimistic.
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