Parliament Passes Bill To Set Up Unified Body To Regulate IFSCs

Parliament on Thursday passed a bill to set up a unified authority for regulating all financial activities in international financial services centres in the country.

The Rajya Sabha passed the bill by a voice vote. The Lok Sabha had approved the proposed legislation on Dec. 11.

The first IFSC in India has been set up at Gujarat International Finance Tec-City in Gandhinagar, Gujarat.

Speaking in the Upper House, Finance Minister Nirmala Sitharaman said the authority would also be responsible for regulating any other IFSC centre which comes up in the country in future as well.

She was responding to Congress member Jairam Ramesh who said the authority has been set up to just cater to one centre in Gandhinagar.

Sitharaman said all the laws of land, including the Prevention of Money Laundering Act, will apply on the centres while adding that the unified authority would be subject audit by the Comptroller and Auditor General of India.

On a separate query she said that all transactions at the centre are going to be in foreign currency and therefore there was no question of rupee convertibility.

Giving details about the operations at Gandhinagar centre, the Finance minister said that two stock exchanges have been set up there and a daily trade volume currently stands at $4 billion.

"Besides, there are 13 international banking units operational there. ECB lending has happened from there," she said, adding that the IT-enabled financial services has provided 10,000 jobs at the location.

The International Financial Services Centres Authority Bill, 2019, was introduced in the Lok Sabha after withdrawal from the Rajya Sabha.

Currently, the banking, capital markets and insurance sectors in IFSC are regulated by multiple regulators -- the Reserve Bank of India, the Securities and Exchange Board of India, the Pension Fund Regulatory and Development Authority and the Insurance Regulatory and Development Authority of India.

The bill amends 14 Acts, including the Securities and Exchange Board of India Act, the IRDA Act and the Pension Fund Regulatory and Development Authority Act.

The dynamic nature of business in IFSCs necessitates a high degree of inter-regulatory coordination and it also requires clarifications and frequent amendments in the existing regulations governing financial activities in IFSC.

On the criticism on why it is being set up in Gandhinagar, she said, the Gujarat government had applied for setting up financial sector Special Economic Zone and the approval given by the then Congress-led United Progressive Alliance in 2011.

She also said that there is no limit on how many IFSCs can be set up but others can come up after first centre (GIFT City) becomes fully operational.