CHAPTER 7 International Financial Services Centres Authority (IFSCA)

Question1.

What are the functions of the International Financial Services Centres Authority (IFSCA) under the IFSC Act, 2019?

Answer: 1.

Functions of Authority [Section 12]: It shall be the duty of the Authority to develop and regulate the financial products, financial services and financial institutions in the International Financial Services Centres, by such measures as it deems fit.

The powers and functions of the Authority shall include:

(a) Regulating the financial products, financial services and financial institutions in an IFSC which have been permitted, before the commencement of the Act, by any regulator for any International Financial Services Centre.

(b) Regulating such other financial products, financial services or financial insti- tutions in the IFSC as may be notified by the Central Government from time to time.

(c) Recommending to the Central Government such other financial products, financial services and financial institutions which may be permitted in IFSC by the Central Government.

(d) Perform such other functions as may be prescribed.

Question2.

What is an International Financial Services Centre?

Answer: 2.

International Financial Services Centre: Financial Services Centres those which cater to customers outside their own jurisdiction are referred to as Inter- national Financial Services Centres (IFSC). These centres are 'international' in the sense that they deal with the flow of finance and financial products/services across borders.

International Financial Services: International Financial Services are those cross-border services, that deal with the flow of finance and financial products and services such as raising of funds such as debt and equity, risk management, mutual funds and pension funds, asset management done by insurance companies, corporate treasury management operations among others.

Specialized Financial Services: In common parlance, an IFSC is a jurisdiction with high concentration of financial institutions such as Banks, Stock Markets & related entities, Insurance firms, Fund Managers, FinTech firms, etc., which offer specialized financial services to non-residents and residents, in an environment that promotes financial innovation and facilitates cross border transactions.

Question3.

What are the various Financial Products as prescribed under the Interna- tional Financial Services Centres Authority Act, 2019?

Answer: 3.

Financial Product [Section 3(1)(d)]: Financial product means –

(i) Securities

(ii) Contracts of insurance

(iii) Deposits

(iv) Credit arrangements

(v) Foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately

(vi) Any other product or instrument that may be notified by the Central Government from time to time.

New Financial Products notified by the Central Government:

(1) Aircraft lease including operating and financial lease and any hybrid of operating and financial lease of aircraft or helicopter and engines of aircraft or helicopter or any other part thereof.

(2) Bullion spot delivery contract.

(3) Bullion depository receipt with underlying bullion.

(4) Operating lease including any hybrid of operating and financial lease of such product or equipment as financial product.

(5) Ship lease including operating lease and hybrid of operating and financial lease, of a ship or ocean vessel, engines of ship or ocean vessel, or any other part thereof, as a financial product.

Question4.

Which securities may be permitted for trading by stock exchange in IFSC?

Answer: 4.

Permissible Securities: The stock exchanges operating in IFSC may per mit dealing in following types of securities and products in such securities in any currency other than Indian rupee, with a specified trading lot size on their trading platform subject to prior approval of the SEBI:

(1) Equity shares of a company incorporated outside India.

(2) Depository receipts.

(3) Debt securities issued by eligible issuers.

(4) Currency and interest rate derivatives.

(5) Index based derivatives.

(6) Commodity Derivatives.

(7) Derivatives on Equity shares.

(8) Such other securities as may be specified.

MCQ’s

1. To make IFSC competitive in comparison to other jurisdictions and to attract entities and investors into IFSC, certain fiscal benefits and tax exemptions are provided to IFSC. The IFSC by virtue of being established within a SEZ had certain inherent fiscal benefits and tax exemptions and various other benefits have been provided by the Government

exclusively to IFSC units. Thus, units in IFSC can claim – (a) 50% tax exemption for 10 consecutive years out of 15 years.

(b) 100% tax exemption for 5 consecutive years out of 10 years.

(c) 50% tax exemption for 5 consecutive years out of 15 years.

(d) 100% tax exemption for 10 consecutive years out of 15 years. (2 Marks)

Answer: (d)