The International Financial Services Centres Authority (IFSCA) on Wednesday approved draft banking regulations for banking operations at IFSCs.
Banking constitutes one of the major focus areas of IFSCs (International Financial Services Centres) and is expected to drive and facilitate the other constituent operations in IFSCs in due course, IFSCA said in a statement.
“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 said.
The authority approved the draft banking regulations at its meeting held on Wednesday, as per the statement.
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 net worth of not less than $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 net worth of at least $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 persons resident in India and persons 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 this year 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.