An international financial services centre (IFSC) caters to customers outside the jurisdiction of the domestic economy, dealing with flows of finance, financial products and services across borders. The IFSC brought back the financial services and transactions that are earlier carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of Financial Institutions (such as banks, insurance companies, etc.) to India. Both national and international institutions dealing with international financial services would utilise the IFSC platform of India for inbound and outbound investments with improved ease of doing business which is intended to provide Indian corporates with easier access to global financial markets and to complement and promote further development of financial markets in India. The financial service centres in London, New York and Singapore are considered global financial centres.
In India, the International Financial Services Centres Authority (IFSCA) has been established on April 27, 2020, under the International Financial Services Centres Authority Act, 2019. It is headquartered at GIFT City, Gandhinagar in Gujarat. The main objective of the IFSCA is to develop a strong global connect and focus on the needs of the Indian economy as well as to serve as an international financial platform for the entire region and the global economy as a whole. Both national and international institutions dealing with international financial services would utilise the IFSC platform for inbound and outbound investments with improved ease of doing business, thereby making GIFT IFSC a global financial hub. The authority will regulate financial products such as securities, deposits or contracts of insurance, financial services, and financial institutions which have been previously approved by any appropriate regulator such as the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), PFRDA and IRDAI, etc., in an IFSC. It will also regulate any other financial products, financial services, or financial institutions in an IFSC, which may be notified by the central government. It may also recommend to the central government any other financial products, financial services, or financial institutions, which may be permitted in an IFSC.
The Reserve Bank on February 16, 2021, permitted resident individuals to make remittances under the Liberalised Remittance Scheme (LRS) to International Financial Services Centres (IFSCs) in the country. The decision of the RBI is aimed at deepening the financial markets in the IFSCs and providing an opportunity to resident individuals to diversify their portfolios. The remittance shall be made only for making investments in IFSCs in securities, other than those issued by entities/companies resident (outside IFSC) in India. The Resident Individuals may also open a non-interest-bearing Foreign Currency Account (FCA) in IFSCs, for making the above permissible investments under LRS. Any funds lying idle in the account for a period up to 15 days from the date of its receipt into the account shall be immediately repatriated to the domestic INR account of the investor in India.