Paving the way for the country’s first finance SEZ, the Gujarat International Finance Tec-City (GIFT), to commence operations, finance minister Arun Jaitley at a function here on Friday unveiled the composite regulatory framework for financial-sector players expected to set up shop there, but shied away from announcing the tax sops that would eventually help it to give a credible competition to entrenched counterparts in Dubai and Singapore.
Over a period of time, GIFT will likely get back much of the business of financial services — currency derivatives and reinsurance businesses, for instance — that India is losing out to Singapore, Dubai and London now, the minister said.
The exclusive regulations for international financial services centre (IFSC) would allow domestic and foreign firms to open offshore banking as well as insurance and capital market intermediaries at GIFT.
Among others, the special dispensation will allow companies incorporated outside India to raise money in foreign currency by issuing and listing their shares on stock exchanges within the IFSC, where individual and institutional investors from India and abroad, including NRIs, would be allowed to trade.
Indian as well as foreign companies will also be able to underwrite insurance/reinsurance business of foreign jurisdictions and allow banks, stock exchanges, depositories and clearing corporations to do business with a relatively low level of capital.
Among the regulators, the Reserve Bank of India, Securities and Exchange Board of India and Insurance Regulatory Authority of India have already issued the relaxed norms for IFSCs.
The IFSC regulatory regime allows Indian and foreign stock exchanges to set up separate bourses within IFSCs as subsidiaries, while market entities from India and abroad would be allowed to operate there by providing issuance and trading in depository receipts and debt securities of
domestic as well as overseas companies. The capital and other requirements have been relaxed for some time for exchanges, clearing corporations and depositories to set up shop in the IFSC.
Speaking at the function, Gujarat chief minister Anandiben Patel said GIFT would help attract investments to the tune of Rs 78,000 crore when it becomes fully operational. Urging other states to emulate the GIFT smart-city model, Jaitley said the IFSC would add to the country’s GDP significantly over a period of time.
Financial services secretary Hasmukh Adhia said: “Dubai International Finance Center was conceptualised in year 2004. It’s a very small area, but it is contributing to 12 % GDP of Dubai. Similarly 20% of the GDP of Japan comes from financial services.”
Underlining the potential of IFSCs, IRDA chairman TS Vijayan said reinsurance business worth Rs 7,300 crore went out of India in the past year. India could potentially become a reinsurance hub for the south Asian region, he said.
The GIFT city project is being implemented in three phases of which Phase I is nearing completion. The first phase of GIFT City involved development of 10 million sq ft of commercial built-up area, with 7.7 million sq ft being developed by one of the promoter groups, IL&FS. It is strategically located on the Delhi-Mumbai Industrial Corridor and is connected by road with plans for a bus rapid transit system and a Metrolink Express for Gandhinagar and Ahmedabad mass transit rail system in the pipeline.