The year 2019 is beginning to show immense promise for the growth of India’s first International Financial Services Centre – GIFT City, Gujarat. GIFT City is a ‘smart’ city with high-quality physical infrastructure, an IFSC structured as special economic zone and global financial hub.
The International Financial Services Centres Authority Bill, 2019 was recently passed by the country’s cabinet to establish a unified regulator to oversee the dynamic financial services undertaken in GIFT City and ease inter-regulatory coordination.
The need for a coherent regulatory framework for India’s first IFSC was recognized in the Union Budget 2018, when the Finance Minister of India proposed the idea of a unified regulator to play the key role of a catalyst and provide an integrated and undivided approach to the ease of doing business with a single window clearance. It was also advocated that one of the most important roles of a unified regulator would be to act as an enabler by creating a conducive regulatory framework that is benchmarked globally. It would not be helmed around domestic rules and regulations, and instead would try to create a level playing field for the IFSC to compete globally.
This development forms part of a series of steps that the government has taken recently to promote GIFT City. Over the last three years, the Regulators in India namely Reserve Bank of India (banking and exchange control), Securities & Exchange Board of India (capital markets), Insurance Regulatory & Development Authority of India (insurance, reinsurance and insurance intermediaries) have created the issued regulatory framework allowing Indian and foreign financial institutions to open their offices in GIFT City.
The framework for allowing foreign insurers and reinsurers to set up shop in GIFT City was already provided by insurance regulator IRDAI. GIFT City presents itself as an opportunity to insurers and reinsurers globally to penetrate the Indian markets providing immense growth potential as an industry. GIFT City caters to customers outside the jurisdiction of the domestic economy and allows financial interactions between service providers and customers across borders.
Late last year, IRDAI notified the revised norms under the order of preference which places insurers and reinsurers set up in GIFT City above global cross border reinsurers.
With the advent of the regulatory framework for setting up insurers and reinsurers in the realm of IFSC, the enabling of insurance intermediaries to set up in IFSC was much awaited. Recently in January, the framework to facilitate the entry and operations of domestic intermediaries in GIFT City was unveiled by IRDAI. Incentives in direct and indirect tax coupled with regulatory ease for setting up and operations have made the prospects of new business and growth brighter for insurance intermediaries.
The recent Vibrant Gujarat Summit 2019 brought about major optimism in global investors and the available opportunities in GIFT City.
Mr. Subhash Chandra Khuntia, Chairman of IRDAI said that GIFT City has the potential to emerge as a hub for the reinsurance sector for inbound and outbound financial transactions. Mr. Uday Kotak, vice chairman and MD of Kotak Mahindra Bank highlighted four sectors where GIFT City offers immense opportunities for business. These are stock markets, offshore asset management, offshore banking and Reinsurance. “India has the best minds in asset management, but we find that they move to other financial services centre as there were not similar centres in India. With GIFT City, we can present this brain drain,” said Kotak
Global Financial Centres Index, the world’s most authoritative comparison of the competitiveness of the world’s leading financial centres has recently featured GIFT City as one of the significant emerging IFSCs in the latest edition of ‘Global Financial Centres Index 24 (GFCI)’, released in London in September 2018. GIFT is ranked third in the list of the GFCI report, which has highlighted 15 centres that are likely to become more significant in the next few years.
“It is a great achievement for GIFT IFSC to join the GFCI so early in its development as a financial centre and is very encouraging that so many respondents see GIFT as becoming more significant in the future,” said Mark Yeandle, Director of Z/Yen Partners and the author of the Global Financial Centres Index series. The rank takes into consideration five major factors namely business environment, human capital, reputation, infrastructure & financial sector development. This is a significant achievement for a centre entering for the first time in the main index, GIFT City noted.
“The recognition of GIFT IFSC in list of most significant emerging financial centres and entry into main index of global financial centres by GFCI is the testimony of the contribution GIFT IFSC is making in the international financial services business,” said Ajay Pandey, MD & Group CEO, GIFT City.
The GIFT City profile in the latest GFCI report also states that GIFT City is a gateway for inbound and outbound business from India. GIFT City is fast emerging as a preferred destination for undertaking International Financial Services. GIFT City covers Banking, Insurance, Capital Market and allied services covering law firms, accounting firms and professional services firms. It provides very competitive cost of operation with competitive tax regime, single window clearance, relaxed Company Law provisions, International Arbitration Centre with overall facilitation of doing business.