GIFT City, India’s first operational International Financial Services Centre (IFSC), disbursed $20 billion dollar loans to Indian corporates in FY25. This was more than a third of India’s total offshore borrowing. The centre is planning to start a commodity trading centre, and is fine-tuning regulations to support global fund managers. K. Rajaraman, chairperson of IFSC Authority that regulates GIFT City and other IFSCs in India, discusses these and other ambitious plans in an interview with Kuldeep Singh. Edited excerpts
What is your long-term vision for GIFT City?
Gift City is designed to be one of the platforms for raising capital for India’s growth journey. Last year, Indian corporates raised total debt, roughly, about $61 billion, out of which, $19 billion was provided by Gift City’s international banking units.
Apart from natural advantages which India enjoys in terms of affordability and human resources, the low cost of living compared to international destinations is an advantage for us. Places like Singapore and Dubai are 3-4 times expensive. Besides, corporate tax waiver for 10 years out of 15 years would be attractive to investors. We have done a great deal of work to ease regulation, make them globally aligned and business-friendly. Market integrity is protected too.
Every three years, we upgrade our regulations, because global financial markets keep evolving, and our regulations have to keep pace. One of our work is to benchmark ourselves with the rest of the world.
How do you plan to accelerate the shift of financial business from Indian cities like Mumbai to GIFT City?
Our role will be to move businesses from outside the country to GIFT city. Indian businesses can use this facility for their advantage, not to really shift here. Of course, large companies have started using the Gift City ecosystem in a very big way. Some of them have issued bonds in the Gift City exchange to raise money for their operations. They have approached banks here for very large amounts of credit; one large company has raised $1 billion dollars from here. Then there are large Public Sector Undertakings, which have set up treasury centers. Some of the companies have also used the Gift City insurance companies and re-insurance companies to actually do insurance for their global businesses.
Aircraft and ship leasing has taken off in GIFT City. What is the next big “non-banking” finance sector you are eyeing?
A number of Indian companies today also set up holding companies across the world. So they typically go to Singapore etc. from where they hold other foreign assets. We believe that time has come for Gift City to host Indian and foreign companies to set up their holding companies here. We are working on a framework which will enable that to happen.
We are also working on enabling commodity trading from here, and have sent a proposal in this regard to the government. Commodity trading requires financing. This is an opportunity for the Gift City financial ecosystem to actually become deep and liquid. If you look at big trade destinations like Switzerland or Singapore, they don’t have any physical activity there. But they have the ability to create a good policy environment and capabilities to impart training. So we believe that “India at 2047” is about achieving global excellence in manufacturing, which requires a strong presence in commodity trading — base metals, energy products, etc.
Many global banks and funds still hesitate to set up operations in India because of concerns around capital controls, repatriation, and taxation. What concrete regulatory changes is IFSCA planning to address these issues?
Gift City businesses are not subject to capital controls. People can repatriate their profits without any hassle. Of course, there are other Indian laws which apply, like the Prevention of the Money Laundering Act. We have regulations to ensure that clean money comes into this jurisdiction. There are exemptions under various laws for the purpose of making it easy to do business here. We as a regulator have ensured that the businesses here are provided with an environment of ease when it comes to doing business.
How close are we to major global asset managers (BlackRock, Vanguard, etc.) launching India-focused funds domiciled in GIFT City?
There is some fine-tuning which has to be done to support global fund managers, including Safe Harbour provisions. We have sent proposals to the government to consider this. So once these are done, we expect large global players to come in. Some international players are already here, like Morgan Stanley, LGT and Adia.
When these global fund managers come here, they expect to manage the funds across the world by sitting here, and employing Indian people. This is what we have to facilitate.
How is IFSCA working to harmonise regulations between GIFT City and onshore India?
A growing number of Indians are investing abroad. About $3-4 billion such investments are made by individuals. Our view is that instead of investing directly in units in New York and Singapore, they can use Gift City as it provides a regulatory ecosystem here. If you invest directly in such places from Mumbai or other Indian cities, then there will be no entity who is answerable to you, because they are under some other regulator’s perview. By bringing this activity from foreign countries to this place, we can create jobs here.
Our idea is to actually add capital to the domestic market. Our idea is not to attract the domestic Indian, but 15.8 million NRIs, 19.3 million persons of Indian origin, and of course, the foreigners. We are building a KYC system which can enable digital onboarding of Non Resident Indians. So last fortnight, we released the assistant video KYC for cross-border from 34 jurisdictions. We’ll be able to create an account and they can start investing. We are also working with the ministry of electrionics & IT and the UIDAI to enable face authentication for cross-border transactions. All this will enable the retail investors outside the country to use our facility.
GIFT City now has a regulatory sandbox. Can you share what new areas IFSCA is encouraging through the sandbox?
The sandbox was set up to enable Fintech to come and serve this market because the people who are the customers of this domain are not actually living here. Unless we have a sound electronic way of reaching out to these people, business cannot be done here. So we have been encouraging the banks here to set up a complete electronic paperless platform. So that is work in progress. Maybe, by the end of the year, we will see things working out.
A year ago, we allowed a few payment services providers to enter our sandbox and test their crossborder payment systems. Based on that, we have developed our payment services provider regulation. At least about nine entities have been authorized, and more are coming in. So what these payment service providers will do is to have a bridge in some other country and then they will enable the NRIs to pay effortlessly using their mobile phone. So which means that the investment processes will become far more simple.