Key Consideration in establishing Banking Unit in GIFT City

Introduction

The International Financial Services Centers Authority (IFSCA) Banking Regulations, 2020, along with its amendments, establish a robust regulatory framework for IFSC Banking Units (IBUs) and their activities within the International Financial Services Centre (IFSC) in GIFT City. The IFSCA has embraced principle-based regulations to streamline the operational landscape for banking entities.

Setting Up an International Banking Unit

Both Indian and foreign banks aiming to establish an IBU in IFSC must secure a license from IFSCA. These banks can set up an International Banking Unit as a "Branch" in GIFT-IFSC. The parent bank must meet the following conditions to ensure regulatory compliance:

• Maintain necessary regulatory capital, with a minimum requirement of USD 20 million at the parent bank level.
• Obtain a "No Objection Letter" from the home regulator for setting up an IBU in IFSC.
• Provide a Letter of Comfort from the parent bank regarding liquidity and resource support to the IBU.

Enhancing Ease of Doing Banking Business in GIFT IFSC

IFSCA has introduced the IFSCA Banking Handbook, a comprehensive source encompassing all instructions and directions governing banking operations in IFSC, aligned with the amended regulations. The handbook consists of three main components:

• General Directions
• Conduct of Business Directions
• Prudential Directions

Prudential Regulatory Requirements

The IFSCA Banking Regulations outline specific prudential regulatory requirements for IBUs, ensuring financial stability and risk management. Key requirements include:

1. Maintenance of Ratios:
2. Compliance with Prudential Directions:

Key Business Opportunities:

Conclusion

The regulatory framework established by IFSCA for IBUs in GIFT City is designed to foster a conducive environment for banking operations while ensuring stringent adherence to regulatory standards. By maintaining robust prudential requirements and streamlining regulatory processes, IFSCA aims to enhance the ease of doing banking business within the IFSC, contributing to the growth and development of India's financial landscape.

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