International Financial Services Centre Authority

International Financial Services Centre Authority

Establishment of IFSCA

• • The International Financial Services Centres Authority Act, 2019 (the “IFSCA Act”) created the IFSCA as a statutory body to oversee and develop financial services, financial products, and financial institutions located at the Indian International Financial Services Centre (IFSC).
  • Its main office is located in Gujarat’s GIFT City, Gandhinagar.

Background

• • Before IFSCA was established, the business in IFSCs was governed by a number of regulators, including RBI, SEBI, Pension Fund Regulatory and Development Authority (“PFRDA”), and IRDAI.
  • But in order to make it easier for businesses operating in the IFSC to function, inter-regulatory coordination with regard to the current regulations governing businesses in the IFSC was essential.
  • To that end, the GoI established the IFSCA.

Role of IFSCA

• • The International Financial Services Centre (IFSC) in India uses the IFSCA as a single, unified authority for the development and supervision of financial institutions, financial services, and financial products.
  • The first international financial services centre in India is currently the GIFT IFSC. The RBI, SEBI, PFRDA, and IRDAI were the domestic financial regulators that oversaw IFSC business prior to the creation of IFSCA.
  • A world-class regulatory environment and ease of doing business in IFSCs are the goals of the IFSCA, which was established as a single regulator with a comprehensive vision due to the dynamic nature of business in IFSCs, which demands a high degree of inter-regulatory coordination within the financial sector.
  • The IFSCA’s primary goals are to forge strong international ties, concentrate on the requirements of the Indian economy, and act as an international financial hub for the region and the world economy at large.

Powers of IFSCA

• • The IFSCA has extensive authority to regulate financial products, financial services, and financial institutions under Section 13 of the IFSC Act.
  • The clause gives IFSCA the authority to regulate the securities, banking, and insurance sectors in India in the same ways as suitable regulators like SEBI, RBI, PFRDA, and IRDAI.
  • Among the key responsibilities of IFSCA are overseeing the operations of stock exchanges and brokers within the IFSC, establishing prudential regulatory standards for IFSC Banking Units (“IBU”), and facilitating the establishment of Alternative Investment Funds (“AIFs”) within the IFSC.

Composition of IFSCA

• • The GoI will appoint a full-time member to serve as the Chairperson of the IFSCA.
  • It will also include two Ministry of Finance officials nominated by the Government of India, one member each from the RBI, SEBI, IRDAI, and PFRDA, and two additional members appointed by the Government of India based on a Selection Committee’s recommendation.
  • Depending on what the GoI thinks appropriate, these members may be appointed as full-time or part-time members.

Funding sources of IFSCA

• • GoI has the authority to give the IFSCA any amount of money it sees fit.
  • Additionally, the International Financial Services Centres Authority Fund (“IFSCA Fund”) will be established, and all grants, fees, charges, and amounts received by the Authority will be credited to the IFSCA Fund (as determined by the Government of India).

Functions of IFSCA

• • Eight financial services and financial institutions in the ifscs work to advance and manage financial products.
  • To oversee financial services, financial institutions, and financial products in an IFSC that were approved by any IFSC regulator—such as RBI, SEBI, etc.—prior to the implementation of the IFSCA Act; and
    to oversee the financial services, financial institutions, and financial goods within an IFSC, as periodically announced by the Government of India.