IFSC submits its report on Capital Market to IFSCA

IFSC International Retail Business Development Committee has presented its final report to IFSCA on November 11. The final report has recommendations on Capital Markets. The committee also made recommendations for the development of IFSC. Before this, the committee has submitted two interim reports on insurance and banking.

This IFSC International Retail Business Development Committee was appointed on August 3, 2020 by International Financial Services Centres Authority (IFSCA). The authority mandated the committee to submit its report in 3 months.

Key Recommendations of the Report

Banking
  • Permit retail participation by Indians (residing in the country) including LRS investments and enable IFSC Banking Units (IBUs) to provide banking products and solutions to retail/ individual clients.
  • To enable Wealth management capabilities in IBU by allowing investments in different markets.
  • To permit IBUs for offering foreign currency (FCY) clearing services from the IFSC and setting up a central clearing mechanism in the IFSC for the same.
  • To permit IFSC Banking Units for obtaining FPI (Foreign Portfolio Investor) license and investing in rupee-denominated corporate bonds, Government Securities (G-Secs), and other permissible rupee-denominated securities.
  • To permit IBUs to finance Indian exporters for pre-shipment in foreign currency in addition to post shipment.
  • To permit IBUs for opening current account (including Escrow account) for all entities willing to do so.
  • To remove the requirement of maintaining liquidity ratios.
Insurance
  • To permit Persons of Indian Origin (PIOs)/Non-resident Indians (NRIs) for buying Life Insurance policies from companies set up in the IFSC for themselves as well as their family members based in India and abroad and also allowing them to pay premium in the currency as per their choice (also including Indian currency).
  • To allow insurance companies for offering health insurance products to PIOs/NRIs covering their family members based in India.
  • To allow Insurers to set up subsidiaries in IFSC for promoting business.
  • To reduce Net Owned Funds (NOF) requirement to INR 5 billion in order to promote mid-sized foreign reinsurers for setting up base in the IFSC.
  • To allow Indian investors to set up direct and reinsurance companies with lower capital requirements for promoting insurance abroad.
  • To encourage foreign reinsurance brokers for setting up base in IFSC.
Asset Management and Capital Markets
  • To permit resident individuals for investing in Mutual Funds (MFs) or Alternative Investment Funds (AIFs) in IFSC through LRS route.
  • To permit resident individuals for investing in companies listed on the IFSC exchanges through the LRS route.
  • To develop a framework for allowing Indian or foreign issuers to raise debt or equity in IFSC.
  • To allow wholly owned subsidiaries of banks to operate as Clearing /Trading Members without setting up a separate company.
  • To implement simple and practical separate safe harbor regime for IFSC Fund Managers.
  • To develop a payment system for USD and other foreign currency settlements in IFSC.
  • To allow hybrid structures like a Variable Capital Company (VCC) to manage funds in the IFSC.

International Financial Services Centres Authority was launched by the government of India to regulate all the financial services at IFSC. Injeti Srinivas is the Chairman of IFSCA.

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