IFSCA approves draft Banking regulations for banking operations at IFSCs

International Financial Services Centres Authority (IFSCA) has approved draft Banking regulations for banking operations at IFSCs (International Financial Services Centres). In its meeting yesterday, the IFSC Authority approved the International Financial Services Centres Authority (Banking) Regulations, 2020. This will pave the way for putting in place the rules for the various aspects of banking operations that would be permissible at the IFSC.

The Finance Ministry said, Banking constitutes one of the major focus areas of IFSC and is expected to drive and facilitate the other constituent operations in the IFSC in due course. A self-contained regulation laying down the major principles of banking operations at IFSCs is thus an important step in the IFSC reaching its desired potential, it added.

The salient aspects of the banking regulations include laying down the requirements for setting up IFSC Banking Units (IBUs) and permitting persons resident outside India -- having a net worth of not less than USD 1 million -- to open foreign currency accounts in any freely convertible currency at IBUs.

The draft regulations provide for permitting persons resident in India -- having a net worth of at least USD 1 million -- to open foreign currency accounts in any freely convertible currency at IBUs to undertake any permissible current account or capital account transaction or any combination thereof under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India.

It also lays down the permissible activities of IBUs such as credit enhancement, credit insurance and sale, purchase of portfolios, engaging in factoring and undertaking equipment leasing, including aircraft leasing.

As per the draft regulations, the authority can determine businesses that a banking unit may be permitted to conduct in INR with person's resident in India and person's resident outside India, subject to settlement of the financial transaction in relation to such business in freely convertible foreign currency.

The draft regulations will be notified by the government in due course, the statement said.

Gujarat-headquartered IFSCA has been authorised to regulate all financial services at IFSCs. The IFSCA was established on April 27, 2020, with its head office in Gandhinagar.

In December 2019, Parliament passed a bill to set up a unified authority for regulating all financial activities at IFSCs in the country.