Reserve Bank prescribes tough norms for IFSC banking units

RBI said banks will be required to provide a minimum capital of $ 20 million to the IFSC banking units (IBU).

The Reserve Bank of India (RBI) on Wednesday said banks which want to set up banking units in an International Financial Services Centre (IFSC) will not be allowed to transact in rupee or open current or savings accounts. However, they will be exempt from both cash reserve ratio and statutory liquidity ratio requirements of the RBI.

Setting tough norms for such units, the RBI said banks will be required to provide a minimum capital of $ 20 million to the IFSC banking units (IBU). They can undertake transactions with non-resident entities other than individual, retail customers and high networth individuals (HNIs). “They cannot issue bearer instruments or cheques. All payment transactions must be undertaken via bank transfers,” the RBI said in a notification.

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“IBUs are not allowed to participate in the domestic call, notice, term, forex, money and other onshore markets and domestic payment systems,” the RBI said while announcing the broad contours of the scheme.

Indian banks — public and private sector — authorised to deal in foreign exchange will be eligible to set up IBUs. Eligible banks would be permitted to establish only one IBU in each IFSC, RBI said.