In an interpretative letter sought under the SEBI (Informal Guidance) Scheme, 2003 (“Informal Guidance”), the markets regulator has clarified that the investment manager of an alternative investment fund (“AIF”) can provide investment management services to an offshore fund only as a SEBI-licensed portfolio manager under the SEBI (Portfolio Managers) Regulations, 2012 (“PM Regulations”). SEBI also reiterated that the investment managers of AIFs are considered to be regulated by SEBI. In this post, we will explore the queries, SEBI’s responses, and implications for the industry.Continue Reading SEBI Clarifies Applicability of Portfolio Managers Regulations to an Indian Manager of an Offshore Fund
The onset of Global In-house Centres (“GICs”) in India was driven by global financial services companies seeking to drive costs down and access India’s large talent pool across various locations. These factors together made it a compelling case for GICs to invest in India to setup large centres which performed a variety of functions across technology, risk, AML, operations, research, credit analysis, etc., for a wide variety of businesses, from retail banking, wholesale banking to investment banking, located in various foreign countries. This model has been visibly successful in driving the upskilling of a large talent pool in India and enabling significant cost advantages to the financial services companies that have implemented this model.Continue Reading GICs in IFSC, GIFT City: A Combination to Unlock Value
The Gujarat International Financial Tec-City (“GIFT”) in Gandhinagar, Gujarat, is India’s first operational greenfield smart city, housing a domestic tariff zone and an International Financial Services Centre (“IFSC”) in a Multi-service Special Economic Zone (“SEZ”). As part of developing India’s very own and first IFSC, both Indian and foreign banks are permitted to establish and operate IFSC Banking Units (“IBU”) from GIFT IFSC, upon obtaining the requisite licenses and permissions. The IBUs have the advantage or the ability to transact in freely convertible foreign currencies in the offshore markets, while being situated within the territorial borders of India. From 2015 to early 2020, the Reserve bank of India issued notifications and regulations related to the IFSC framework. Thereafter, on April 27, 2020, the International Financial Services Centres Authority Act, 2020, was notified, pursuant to which the International Financial Services Centres Authority (“IFSCA”) was established on October 1, 2020, as the unified regulator with wide powers to develop and regulate financial products, financial services, and financial institutions in IFSCs, including IBUs.Continue Reading IFSC Banking Units – offshore branches with onshore dispute resolution?
Previously, RBI had permitted Indian entities to make mandatory sponsor commitment to AIFs in IFSC under the ‘automatic route’
Alternative Investment Funds (“AIFs”) set up in an International Financial Services Centre (“IFSC”) are required to register themselves as Foreign Portfolio Investors (“FPIs”), for being able to invest inter alia in securities listed on Indian stock exchanges or in specific listed or unlisted corporate debt securities of Indian companies. Since entities set up in IFSCs are equivalent to ‘non-residents’ for the purposes of Indian foreign exchange regulations, restrictions placed by Securities Exchange Board of India (“SEBI”) and the Reserve Bank of India (“RBI”) on participation of Indian residents in FPIs are, by default, applicable to AIFs in IFSC. Considering that AIFs may be set up by managers/ sponsors who are resident Indian entities and that the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), require managers/ sponsors of AIFs to make mandatory sponsor commitment to the AIF, it is imperative that the restrictions on residents investing in FPIs do not conflict with the mandatory sponsor commitment requirements under AIF Regulations, as applicable to AIFs in IFSC.Continue Reading SEBI amends FPI Regulations to permit registration of AIFs in IFSC with resident sponsors/ managers as FPIs
The Government of India (“GOI”) has, in the recent years, realised the importance of aircraft leasing activities in the global market and has made its intentions clear to promote aircraft leasing and financing activities in India’s first International Financial Services Centre (“IFSC”) situated in GIFT City, Gandhinagar. The aim is to bring the aircraft leasing business, currently being carried out in countries that have established themselves in this sector such as Ireland, USA, Hong Kong, Singapore, etc, to the Indian shores. Leasing aircraft from abroad leads to incurring substantial liabilities payable in foreign currencies. Hedging currency fluctuations also becomes an additional cost for Indian airline operating companies. The above reasons highlight cost-inefficiencies and put into perspective how crucial it is to begin aircraft leasing and financing activities in India.Continue Reading Part III (A): Aircraft Leasing in IFSC – Let’s kick the tires and light the fires!
India, being one of the major consumers of international financial services, has been pushing the envelope on making itself the hub for such services. With this objective, the Government of India had operationalised India’s first (and currently the only) International Financial Services Centre (“IFSC”) at GIFT Multi Services Special Economic Zone (“SEZ”) in Gujarat in April 2015. In this regard and to further this objective, the International Financial Services Centres Authority Act was enacted in December 2019 to set up a unified regulator, viz the International Financial Services Centres Authority (“IFSCA”), which commenced operation in October 2020. The IFSCA has been vested with the roles and powers of four domestic regulators, namely the Reserve Bank of India (“RBI”), the Securities and Exchange Board of India (“SEBI”), the Insurance Regulatory and Development Authority of India (“IRDAI”), and the Pension Fund Regulatory and Development Authority. IFSCA has been set up to develop and regulate financial institutions, financial services, and financial products within the IFSCs in India.Continue Reading Role of IFSC in the Indian SPAC Dream: An Overview – Part 1