Calling for a “unified regulatory framework”, RBI Governor Urjit Patel on Wednesday suggested “a single regulator” for better regulation and supervision of financial entities in GIFT City at Gandhinagar that also houses the country’s first International Financial Services Centre (IFSC).
“A unified financial regulatory framework providing for a single regulator for GIFT City could contribute to better regulation and supervision of the financial entities in the City. While individual regulators can supervise the entities initially, when the size of the business is small, a unifed regulator would be necessary to pay undivided attention to the IFSC. Work on the design of such a framework should begin soon as to be able to implement this in time,” said Patel while addressing a seminar on “Business Potential of IFSC in India,” at the Vibrant Gujarat Global Summit.
“There is a need for a modern complementary legal infrastructure. We need to do a lot in this regard. We have to strengthen the legal framework as applicable to entities operating in the City and their counterparts in the domestic sector. It is possible that many business entities that can potentially relocate to GIFT City are waiting for this framework to be put in place,” he added during the event where Union Minister of State for Finance and Corporate Affairs Arjun Meghwal and Deputy Chief Minister of Gujarat Nitin Patel were present.
The RBI Governor asked for reviewing and addressing gaps in the existing laws governing financial contracts in India. He suggested to expedite the formation of a high-level working group to address these gaps. “An IFSC should have a legal structure that is sufficiently supportive of the swift resolution of conflicts and disputes arising from the settlement/enforcement of complex international financial contracts. The contract should be of international standard and enforceable in the court of law and preferably similar to ISDA documentation,” Patel said.
In his 14-minute-long speech, the RBI governor touched upon how IFSCs around the world were seen as vehicles of economic growth and development of the host countries and the frameworks governing IFSC operations should be “well-thought out, guided by ease of doing business principle, tempered by prudent risk management, and geared to deliver efficient financial services.
“Fiscal incentives and other leeway will take GIFT forward only so far, work in areas that I have just suggested is essentially for fully harnessing the IFSC’s business potential,” Patel added.
Deputy Chief Minister of Gujarat, Nitin Patel also made some suggestions to be included in the policies governing GIFT City. “The international exchange at GIFT will be functioning 22-hours a day, then necessary permissions should be given to facilitate investors.”
He also asked RBI to expedite permissions for banks to open new IBUs at GIFT City.
MoUs worth Rs 66,600 crore signed in the financial services sector space
During the seminar on IFSC, several MoUs (Memorandum of Understanding) totally over Rs 66,600 crore was signed. This includes an Rs 30,000 crore MoU by NABARD for financial support to rural financial institutions and state government. The State Bank of India signed an MoU of Rs 30000 crore for credit flows under priority and non-priority sector for a period of two years. Similarly, the Union Bank of India signed a MoU for investing Rs 5600 crore for banking finance in Gujarat. BSE and NSE also signed MoUs. BSE signed a Rs 500 crore MoU for setting up international clearing corporation (in GIFT City), and jointly develop and conduct programmes in the financial markets. NSE signed an MoU of Rs 500 crore for establishing an international exchange and a international clearing corporation at GIFT City. MCX also signed an MoU for setting a “full-fledged business continuity facility.”
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