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A GIFT that keeps on giving

GIFT IFSC has been making gradual progress since its inception in 2015, and has gathered momentum since 2020 when the unified regulator—the International Financial Services Centres Authority (IFSCA)—was set up.

The IFSC was set up by the Indian government under the leadership of prime minister Narendra Modi with the ambition of developing a world-class financial services hub to connect IFSC in India with the global financial centres.

By Nitin Jaiswal

As India’s economy continues to grow and realise its potential, the success of the International Financial Services Center (IFSC) at GIFT City is a going to be of critical importance. IFSC has been making gradual progress since its inception in 2015, but it has gathered significant momentum since 2020 when the unified regulator—the International Financial Services Centres Authority (IFSCA)—was set up by the government of India. This has smoothed out the regulatory process and resulted in a spike in business activity in the GIFT IFSC. Financial players are interested in coming to GIFT City, and now it is easier to do so.

The IFSC was set up by the Indian government under the leadership of prime minister Narendra Modi with the ambition of developing a world-class financial services hub to connect IFSC in India with the global financial centres. Some of the key priorities of the centre has been to bring India centric offshore funds back ‘onshore’ in GIFT IFSC and to provide a platform for Indian companies to list and start raising international (dollar) funds from there, rather than having to go to other global markets.

While GIFT IFSC is at a nascent stage of its journey in relative terms, the early signs are promising. Conceivably, Indian corporates or start-ups will have considerably more flexibility in considering listing venues—with viable access to global funds located in their backyard and the same tax implications as overseas destinations. The IFSCA is to be commended for its highly consultative approach to forming regulations while still enacting those regulations with a swift pace.

This approach is critical to maintain IFSC’s momentum, but also carries a larger, symbolic value that shows Indian business is moving with a new sense of urgency and effectiveness. Likewise, a number of other measures undertaken by the IFSCA are indicative of this new bold and progressive approach. While traditional financial services remain at the core of the prospects of GIFT City, new tactics to encourage fintech and trade financing entities to set up shop are welcome innovations.

As with anything in life, the proof is in the pudding. In this respect, GIFT IFSC’s occupancy is beginning to tell an encouraging story. As of June, more than 300 entities have set up operations in the zone—representing a 140% growth since the IFSCA has taken over—and this has employed 5000 people.

A total of 22 banks, including eight international ones, have set up operations there. The insurance sector is also well represented, with four reinsurers and 17 intermediaries already registered with IFSC. Put in terms that global markets understand—more than $200 billion worth of banking transactions have flowed through GIFT IFSCA entities, and more than $300 billion of over-the-counter derivative transactions, including non-deliverable forwards, have taken place.

On the capital markets side, the exchanges in operation at GIFT IFSC are handling an average daily turnover of $11 billion. Moreover, the much-awaited NSE-IFSC-SGX Connect will be going live this month. This is a partnership framework between India’s National Stock Exchange (NSE) and the Singapore Exchange through which sees clients, investors and SGX traders, who used to trade in NSE-listed Indian securities through SGX, now able to trade in these securities directly through the NSE-IFSC. This will, in turn, support a deeper pool of liquidity here in India.

Two large global banks have operationalised their global in-house centers (GICs) at GIFT IFSC. It is easy to confuse this with a traditional ‘back office’ configuration here in India, but this represents a unique advantage for GIFT—the right combination of talent, liquidity, human resources and economics that allow global financial institutions to operate top-to-bottom in one location. The Indian Government has demonstrated its intention to do everything to support this ambitious endeavor, with finance minister Nirmala Sitharaman announcing regulations to enable the growth of GIFT IFSC in the past five Union budgets. India’s domestic demand and appeal as a destination for global funds is well documented; and the recent spike in fintech and startup unicorns from India is representative of the strong entrepreneurial zeal among our next generations.

Milestone moments—like 75 years of Indian independence—offer a good opportunity to reflect on the past and consider the future. The culmination of global circumstances, sophisticated local regulators, and the lure of India’s economic growth story means that GIFT IFSC is well on track to meet its stated goals.

The writer is head of external relations & government affairs, APAC, Bloomberg

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