IFSCs may soon become reality; Govt, regulators mull new norms

The government and financial sector regulators, including RBI and Sebi, are working on a new set of norms for International Financial Services Centres (IFSCs) - a move that would help setting up such global business hubs in different parts of the country.

Among others, one such IFSC is likely to come up in the GIFT City in Gujarat, while another is likely to be developed in the country's financial capital Mumbai, sources said.

There have been several attempts in the past to develop IFSCs in India on the lines of global financial hubs like Singapore, Hong Kong and Dubai.

India ranks very low in terms of attractiveness of global financial centres. As per the latest Global Financial Centres Index (GFCI) rankings, New York is on the top, followed by London, Hong Kong, Singapore and Tokyo in the top five. Mumbai is ranked 48th, although up from 61 earlier, as the only Indian city on this index. The new regime could entail easier rules and regulations for foreign financial investors, as also for the Indian entities seeking to do business with overseas financial investors, sources said.

The rules and regulations applicable within IFSCs tend to be different from those applicable outside these centres and a roadmap in this regard is expected to be announced in the Union Budget later this month.

The issue is already being actively discussed by various regulators internally as also collectively including at the forums like Financial Stability and Development Council. At a recent Sub-Committee meeting of the FSDC, the regulators discussed the "matters relating to IFSC".

The meeting was chaired by RBI Governor Raghuram Rajan, while those who attended included capital markets regulator Sebi Chairman U K Sinha, insurance watchdog IRDA chief T S Vijayan, PFRDA Chairman Hemant Contractor, FMC Chairman Ramesh Abhishek, as also top Finance Ministry and RBI officials. Minister of State for Finance Jayant Sinha also said last week that government is keen to transform Mumbai as a global financial centre. Besides, Maharashtra Chief Minister Devendra Fadnavis said that the state government is already working in this regard, but much of the work was to be done by the Centre and the pending issues in this regard should be addressed in the upcoming Union Budget.

Several countries around the world have successfully unlocked their financial services potential by establishing hubs, which over time have become IFSC. These financial services centres help provide suitable regulatory regimes and create a business environment to promote talent and help increase capital flow.