Moving a step closer to having a Dubai and Singapore-like international financial services centres (IFSCs), India’s capital markets regulator Sebi on Friday issued broad guidelines for IFSCs – the first of which is to come up in Gujarat as Gujarat International finance Tec-City (GIFT).
Sebi rules make it easier for setting up stock exchanges, clearing corporations, financial intermediaries, asset management companies and related capital market infrastructure in the IFSC. These rules will be effective from April 1 and called Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015.
Under the rules, any recognised domestic or foreign stock exchange is allowed to establish their subsidiary provided they hold at least 51% stake in the venture. Stock exchanges will need a minimum net worth R25 crore to begin their operations. Eventually, such entities will be required to raise their net worth to R100 crore within three years from the start of their operations.
Similar norms would also be applicable for depositories and clearing corporations coming up in the IFSC. In the case of clearing corporations, the initial minimum net worth requirement is set at R50 crore, which will be increased to R300 crore from three years of their establishment.
The aim of opening an IFSC in India is to bring back billions of dollars worth of financial services business lost to other global financial hubs like London, New York, Dubai, Singapore and Hong Kong. An estimated R1,334 crore per day or R2 lakh crore per year worth of trading in rupee derivatives that currently goes to locations outside India, as per government data.
The IFSC guidelines also allow an alternative investment fund (AIF) or mutual fund (MF) operating in IFSC can accept money from eligible investors only in foreign currency. An MF operating in IFSC shall have a net worth of not less than $2 million which shall be increased to $10 million within three years of commencement of business in IFSC.
IFSC proposal was announced by Finance Minister Arun Jaitley while presenting the 2015-16 Union Budget while the guidelines were approved by Sebi board last Sunday. The regulator also said that stock exchanges operating in IFSC would be permitted to deal in “securities and products in such securities in any currency other than Indian rupee, with a specified trading lot size on their trading platform”.
Under the Sebi Guidelines, 2015, entities operating in these centres would be allowed to issue debt securities subject to certain conditions. Such debt securities should be listed in one or more stock exchanges operating in the IFSC.
“The minimum subscription amount in case of private placement per investor shall not be less than $ 100,000 or equivalent or such amount as may be specified by Board (Sebi) from time to time,” Sebi said.
Any recognised domestic or foreign stock exchange is allowed to establish their subsidiary provided they hold at least 51% stake in the venture.
Bourses will need a minimum net worth R25 cr to begin their operations but will be required to raise their net worth to R100 cr within 3 years from the start of operations.
For clearing corporations, the initial minimum net worth requirement is set at R50 cr, which will be increased to R300 cr from three years of their establishment.