GIFT City Newsletter | August 2024

The GIFT International Financial Services Centre ("GIFT IFSC") established in Gandhinagar, Gujarat is India's first international financial services centre with the intent of catering to global MNCs and financial institutions in alignment with international standards of business. To ensure that utmost benefits can be provided, the entire zone has been equipped with world class infrastructure akin to global standards. This newsletter navigates the journey of GIFT IFSC and the International Financial Services Centres Authority ("IFSCA") set up under the International Financial Services Centres Authority Act, 2019.

IFSCA as a unified regulator is also head quartered at GIFT IFSC and is committed to providing a sound and well-structured regulatory environment by providing a single window clearance system. The IFSCA has been able to achieve this through unification of the powers previously held by four separate regulators: Reserve Bank of India ("RBI"), Securities and Exchange Board of India ("SEBI"), Insurance Regulatory and Development Authority of India ("IRDAI"), and Pension Fund Regulatory and Development Authority of India ("PFRDAI").

We are providing transactional updates including a bird's eye view on legal and regulatory updates related to the GIFT IFSC.

Finance ministry lowers entry barrier for GIFT City listing

August 29, 2024 - To encourage domestic and international firms to register on the international stock exchanges located in GIFT City, the Ministry of Finance has lowered the minimum public float requirement from 25 percent to 10 percent by amending the Securities Contracts (Regulation) Rules, 1957. This initiative is anticipated to facilitate Indian startups and unicorns in tapping into a broader spectrum of foreign investment.

Source: The Hindu Businessline

Ministry of Finance publishes the Securities Contracts (Regulation) Amendment Rules, 2024

August 28, 2024 - In exercise of the powers conferred by section 30 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Central Government amended the Securities
Contracts (Regulation) Rules, 1957. The amendment brings the IFSC and IFSCA within the purview of the Rules and further reduces the minimum float requirements from 25% to 10% for listing in international stock exchanges at GIFT City.

Source: GIFT IFSCA website [ Notification dated August 28th, 2024

The International Fintech Innovation Hub to be set up at GIFT City

August 28, 2024 - GIFT City is set to establish an International Fintech Innovation Hub in collaboration with the Asian Development Bank ("ADB") by January 2025. A $23 million loan has been secured from ADB to improve access to high-quality fintech education, research, and innovation within GIFT City. The hub will be structured around three primary pillars: the first pillar is the International Fintech Institute, which will be developed in conjunction with a prestigious international institution and an Indian partner. The second pillar will consist of a fintech incubator and accelerator aimed at fostering and supporting emerging startups from GIFT City. The third pillar will be a dedicated research center focused on fintech research and development.

Sandip Shah, Head - IFSC Department, Gujarat International Finance Tec-City Company stated that the hub will include cutting-edge infrastructure, the smartness of the city and green field along with an innovation mindset.

Source: Moneycontrol

IndiaFirst Life starts operations at GIFT City

August 28, 2024 - IndiaFirst Life Insurance Company Ltd (IndiaFirst Life) becomes the first Indian life insurer to launch operations in GIFT City. IndiaFirst Life's IFSC Insurance Office (IIO) will feature a specialized team dedicated to catering to the requirements of GIFT City's global clientele.

The company has also introduced a uniquely designed Unit Linked Insurance Plan (ULIP) known as the IndiaFirst Life Wealth Wise plan, specifically tailored for Indians residing abroad. This plan, denominated in US dollars, is ideal for international clients aiming for long-term wealth accumulation and legacy establishment. It presents a range of investment options, enabling clients to invest funds at any time throughout the policy duration while also benefiting from India's economic prospects.

Source: BFSI Network

Paytm plans to set up a development centre at GIFT City

August 22, 2024 - One97 Communications Limited (OCL), parent company of Paytm is planning to invest Rs. 100 crores in Gift City to build a global financial ecosystem which will be complete in the next six months. The development centre intended to set up with the investment will create jobs and have engineers dedicated to offer financial services

"The strategic investment in GIFT City represents a pivotal step towards building an artificial intelligence-driven cross-border remittance and payments technology landscape, presenting global opportunities", said founder and CEO of Paytm, Vijay Shekhar Sharma

Source: Moneycontrol

Memorandum of Understanding with Labuan Financial Services Authority

August 21, 2024 - IFSCA and Labuan Financial Services have entered into a MoU to formalize institutional cooperation between the two institutions for mutual benefit. The MoU was signed by Mr. K. Rajaraman, Chairperson, IFSCA, and Mr. Dato' Wan Mohd Fadzmi bin Che Wan Othman Fadzilah, Chairman, Labuan Financial Services Authority.

The purpose of the MoU is to enhance the exchange of knowledge and exemplary practices related to the development, regulation, and oversight of financial markets within the respective jurisdictions. It aims to ensure the competence and integrity of licensed or registered individuals while fostering high standards and ethical conduct in business operations. Further, the MoU will facilitate the sharing of information pertaining to the laws, regulations, and guidelines that govern financial products, services, and institutions in their respective areas. Additionally, it will include the exchange of insights regarding the implementation of technologies, innovations, fintech, and regtech within the financial ecosystem to advance the development of financial markets in the respective jurisdictions.

Source: GIFT IFSCA website [Press Release dated August 21st, 2024]

IFSCA invites comments on Consultation paper on the proposed International Financial Services Centres Authority (Informal Guidance) Scheme, 2024

August 20, 2024 - IFSCA has issued a consultation paper inviting comments/views/suggestions from the public on the proposed International Financial Services Centres Authority (Informal Guidance) Scheme, 2024. The Scheme intends to provide an avenue for financial institutions and persons intending to set up an office in IFSC to seek clarity and guidance on various issues pertaining to their potential business activity and transactions, which are under the regulatory ambit of IFSCA. It lays down the criteria and conditions which need to be fulfilled before making a request for informal guidance along with the types of informal guidance that may be sought from the departments of IFSCA. The scheme also provides for confidential treatment of all requests upto atleast 90 days from the date of response to the request.

Source: GIFT IFSCA website [public consultation dated August 20th, 2024

Mohandas Pai seeks PM's help over GIFT City's family office rules

August 23, 2024- Mohandas Pai, former CFO of Infosys, has in a post on X (erstwhile Twitter), flagged concerns over a new regulation that reportedly prevents local family offices from setting up investment funds in Gujarat's GIFT City. This move, as reported by Bloomberg, stems from fears that these arrangements could be used to bypass taxes and capital controls.

Source: Business Today

IFSCA halts approvals for local family offices to invest abroad over concerns regarding tax issues

August 20, 2024 - The IFSCA has ceased permitting local family offices to establish investment funds in GIFT City, following concerns that these structures might be utilized to circumvent tax obligations and capital controls, as indicated by feedback from the RBI. The RBI expressed concern that relaxing capital controls for these instruments could create vulnerabilities that may be exploited for money laundering activities.

Currently, India imposes stringent regulations on the transfer of capital outside its borders. According to the Liberalized Remittance Scheme (LRS), each resident is limited to overseas investments of up to $250,000. This cap encompasses various activities, including the acquisition of real estate, investment in stocks and securities, as well as the establishment of joint ventures or subsidiaries.

Source: Mint

M1xchange launches international trade financing platform for Indian MSMEs at GIFT City

August 20, 2024 - M1xchange, a digital platform specializing in invoice discounting for micro, small, and medium enterprises ("MSMEs") has established an international platform known as M1NXT ITFS in GIFT City. This initiative aims to provide Indian MSMEs with access to global factoring services. The international trade financing services ("ITFS") platform is designed to enhance global liquidity for MSMEs, thereby benefiting the overall ecosystem. The introduction of this platform will enable foreign banks registered under M1NXT ITFS. The platform looks to offer trade financing services to Indian MSMEs at a significantly reduced cost.

Source: The Hindu Business line

IFSCA publishes FAQs for the International Financial Services Centres Authority (Book-keeping, Accounting, Taxation and Financial Crime Compliance Services) Regulations, 2024 (BATF Regulations)

August 13, 2024 - The IFSCA has released a set of FAQs concerning the BATF Regulations, aimed at clarifying inquiries and elucidating the regulations. These FAQs cover questions related to the categories of services encompassed by the regulations, the entities mandated to register under these regulations, the registration process, and other essential requirements for establishing ancillary service-providing entities in accordance with the new regulations.

Source: GIFT IFSCA Website [FAQs dated August 13th, 2024]

Sovereign Green Bonds Trading at IFSC To Commence In 2nd Half of This Fiscal: RBI Gov

August 13, 2024 - In April, the RBI had announced that it will issue a framework to enable the trading of sovereign green bonds in GIFT City. Reserve Bank Governor Shaktikanta Das on Saturday said trading of sovereign green bonds shall commence at the International Financial Services Centre in Gujarat during the second half of the current fiscal.The government has been raising funds through green bonds since 2022-23 and has raised a total of Rs 36,000 crore in the last two years.

Source: News 18

View Trade Expands Global Presence with New Office in GIFT City, India and IFSC License

August 12, 2024 - View Trade Holding Corporation ("ViewTrade") announced the establishment of its newly licensed brokerage and fintech regional headquarters subsidiary, ViewTrade International IFSC Private Limited ("VTI IFSC") in GIFT City. Further, the company has also obtained its IFSC trading member license with the National Stock Exchange IFSC ("NSEIX").

With this license, VTI IFSC can provide B2B2C brokerage, custody, and technology solution services from GIFT City and enable financial services firms in GIFT City to open, fund, and maintain global market access brokerage accounts for their customers residing in India and the rest of the world.

Meeting the needs of wealth managers, institutions, and retail clients, VTI IFSC will be supporting a variety of financial products, including equities, ETFx`s, depository receipts, futures and options, UCITS, mutual funds, fixed income, commodities, structured products and alternative investment asset classes. The new entity will also service margin accounts and facilitate connectivity to banking networks, globally, for efficient and seamless money movements to and from accounts.

Source: PTI news

Rolls-Royce & Partners Finance apply for setting up an aircraft engine leasing entity

August 09, 2024 - A formal application has been made by the UK based Rolls-Royce & Partners Finance ("RRPF") to set up an aircraft engine leasing unit in GIFT City. The company will set up the entity as RRPF Engine Leasing (India) IFSC Pvt Ltd and will lease out aircraft engines and other equipment to airline operators. An "in- principal" approval has already been granted to the company by a committee of the IFSCA.

Source: GIFT Gujarat website

Mauritius keen to setup shop in GIFT City

August 07, 2024- Mauritius wants to attract Africa-bound investments from India and host financial services such as financing of immoveable assets in Africa, intellectual property management and reinsurance services. The key objective of the GIFT City collaboration is to attract capital from India to Africa, which will be a win-win situation. The new business avenues are intended to compensate for the loss of direct investment from Mauritius to India.

Source: Mint media

Centre of Excellence in Corporate Forensics to be set up in GIFT City

August 07, 2024 - GIFT City and NFSU sign a Memorandum of Understanding for setting up Centre for Excellence in Corporate Forensics the same has been executed by the hands of Shri. Tapan Ray, MD GIFT City and Dr. J.M. Vyas, Vice Chancellor of NFSU on Wednesday, August 7th, 2024. The driving leadership from both the side is confident for promoting learning and creating a progressive environment for finance and technology, thereby, elevating the GIFT City ecosystem. The primary focus of the centre will be cyber forensics, fintech, forensic accounting, and international arbitration, which will again significantly strengthen expertise within GIFT City. Leadership also believe that the joint efforts will ensure that entities in GIFT City have access to top-tier talent and executive knowledge, driving innovation and excellence. According to the Professor SO Junare, Campus Director, NFSU-Gandhinagar this MOU will Tailored training programs and skill development initiatives will be designed for entities in GIFT City. The partnership will also promote the exchange of faculty and officers and the organisation of symposia, conferences, workshops, short courses, and research meetings. Joint research, consultancy, and continuing education programmes will be conducted, along with the sharing of information on teaching, student development, and research advancements.

Source: The Hindu Business Line

GIFT City at the CafeAlt Conference 2024

August 05, 2024 - Pradeep Ramakrishnan, Executive Director, International Financial Service Authority (IFSCA) has shed light on the opportunities at GIFT City for various stakeholders.

CafeAlt Conference 2024 was an event aimed to gather all the stakeholders of alternate investments wealth managers, distributors, bankers, manufacturers to come on a single platform and deliberate on ways to grow the alternatives pie. It helped the participants discover emerging trends in alternates, strategic positioning of alternates, comprehensive tax planning, help to understand client expectations and inform them about the latest regulatory updates. CafeAlt Conference was held on Aug 23 at the Taj Santacruz, Mumbai.

Source: Gift City Website

IFSCA invites comments on consultation paper on the proposed amendments to the IFSCA (Fund Management) Regulations, 2022

August 05, 2024 - IFSCA has issued a consultation paper on review of IFSCA (Fund Management) Regulations, 2022 targeting certain important areas broadly included amongst other (i) ease of doing business(ii) introducing additional safeguards etc.

Through the proposed amendments the IFSCA looks to invite further investment into GIFT City by increasing the scope of validity of the placement memorandum of schemes from 6 (six) to 12 (twelve) months along with reducing minimum corpus requirements for setting up funds. Proposals have also been made to amend the Regulations so as to provide a higher degree of investor protection under restricted and retail schemes.

Source: GIFT IFSCA website [consultation paper dated August 5th, 2024

Lower ticket size portfolio management services (PMS)

August 05, 2024 - IFSCA the unified regulator at GIFT City, in an attempt to boost portfolio management services has proposed to revise its PMS range to $ 75000 from its earlier limit of $150,000. The update has been provided as a part of the IFSCA's consultation papers released on 5th August 2024.

Source: Mint media website

Tax sops may transform GIFT City into premier financial hub: Experts

August 01, 2024 - Setting up of finance companies and treasury units in IFSC has been made more attractive with exemptions from Section 94B of the Income Tax Act, known as thin capitalisation rules.

Currently, interest payments made to non-resident associated enterprises are limited to 30% of EBITDA, with exemptions for non-banking financial companies, banks and insurance companies.

Recent tax exemptions for retail schemes and exchange-traded funds (ETFs) at the IFSC in GIFT City are expected to attract significant domestic and foreign investments, positioning it as a global financial hub. The changes proposed in the Union Budget, will grant such schemes tax benefits similar to category III alternative investment funds (AIFs) at the IFSC. Category III funds are known for their complex trading strategies and investments in derivatives, include hedge funds and private investments in public equity deals.

"This moves positions GIFT City as an attractive destination for fund managers to raise monies from retail investors for investment in India. The new tax regime aligns with that of similar offshore funds investing into India as foreign portfolio investors (FPIs), and is expected to catalyse the growth of retail schemes within the IFSC," stated Tushar Sachade, partner at Price Waterhouse & Co LLP.

Effective from the assessment year 2025-26, this development will provide a concessional tax rate of 10% on interest and dividend income for the scheme or fund, along with capital gains tax exemption on various securities. The government has also provided relief for venture capital funds housed in the IFSC. These funds will no longer need to explain the source of funds when they extend loans or other amounts to an assessee.

These measures are collectively aimed at enhancing GIFT City's potential as a key global financial hub, drawing in more investment and economic activity.

Source: Financial Express

Contributors to the newsletter:

• Manoj Panzade, Partner
• Gaurav Prakash, Associate

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