The International Financial Services Centres Authority (IFSCA), which functions as a unified regulator for GIFT City IFSC, operates like a startup that does not carry any baggage and has the opportunity to be agile, said K Rajaraman, chairman of the IFSCA.
The IFSCA is the regulator in areas such as banking, capital markets, re-insurance, aircraft financing, and ship leasing, and is hence referred to as unified regulator.
Speaking at Business Standard’s BFSI Insight Summit, Rajaraman said: “We have the opportunity to learn from the best in the world and not get bogged down by the vastness of our past.”
During his address, Rajaraman said the banking and fund ecosystem was robust in GIFT City and had the right building blocks to grow from here.
“Two banks have hit the $4 billion mark in terms of assets. We believe this growth is very robust. We also believe technology is a very important component of a global financial system. And we have put in place a fintech framework which helps financial service entities to launch fintech products,” said Rajaraman.
The IFSCA chief further said the body was in the process of notifying a payments services regulation to enable instant payments.
“We are also working on a payments settlement system. It may get enabled during the second quarter of next year,” he said. The move will help the IFSC achieve instant settlements and reduce its reliance on banks.
Rajaraman said the IFSCA was in the process of enabling direct listing by Indian companies on its exchanges.
“The government is likely to notify the regulations in a month from now. By early next year, it will enable companies to do their initial public offering at GIFT City. The working group is firming up the regulations, and it may require some more tweaks to support the process,” he said.
In August, the IFSCA had proposed key exemptions to the current listing framework and measures for setting up holding companies (holdcos) and special purpose acquisition vehicles (SPACs) to encourage domestic startups to list at the GIFT City, the country’s only international financial services centre (IFSC).
At present, the National Stock Exchange and BSE operate separate units at GIFT City. NSE IFSC has gained popularity after the transition of Nifty contracts traded on the Singapore bourse to GIFT City this July.
Last month, GIFT Nifty derivatives clocked the highest ever single-day turnover of $16 billion.
The recently appointed chairperson reiterated adopting technology at the maiden IFSC to bring innovation and help build the global financial system in the centre.
“We have put in place a fintech framework, which enables the financial sector entities to launch financial and fintech products. We have admitted about 45 fintechs. Not all these have been authorised to launch financial products. So these are in the process of a rollout; there are about 10 in the innovation sandbox phase, and the rest of them are then in the regulatory sandbox stage,” he said.
The sandbox initiative enables all financial and technology entities to test their products in a live environment. Further, all financial regulators in India enabled interoperability to facilitate faster and better testing of such products and services.
“The innovation sandbox provides for very fundamental research in the new financial products that you want to design for the market, but as regulatory sandboxes, where I think a financial product is ready, we provide a limited live market environment for the product to likely be tested before it goes live. So you have a very robust testing system, and the IFSCA has taken a lead on this,” said Rajaraman.
He highlighted the growing popularity of GIFT City among alternative investment funds (AIFs).
“If you look at the fund ecosystem, we have 78 fund managers registered out of GIFT City, and they have registered around 68 AIFs. They have a targeted corpus of $19 billion, of which commitments of $5 billion have been reported to us. And nearly $1 billion has been invested in India by these operational funds,” said Rajaraman.