NEW DELHI: Paving the way for creation of India's first International Financial Services Centre in Gujarat's GIFT City, regulator Sebi on Sunday approved a relaxed set of norms for setting up of stock exchanges and other capital market infrastructure in such centres.
The game-changing regulations are aimed at creating a vibrant IFSC within India on the lines of Dubai and Singapore and help check the flight of trading in rupee and Indian securities to such offshore financial hubs.
The move would allow companies incorporated outside India to raise money in foreign currencies by issuance and listing of their equity shares on the stock exchanges within the IFSC, where individual and institutional investors from India and abroad, including NRIs, would be allowed to trade.
The IFSC regulatory regime would allow the Indian and foreign stock exchanges to set up separate bourses within the IFSC as subsidiaries, while market entities from India and abroad would be allowed to operate there by providing issuance and trading in depository receipts and debt securities of domestic as well as overseas companies.
The capital and other requirements have been relaxed forsome time for the exchanges, clearing corporations and depositories to set shop in the IFSC.
Mutual funds and Alternative Investment Funds set up in the IFSC can also invest in the securities listed there.
"Stock exchanges and clearing corporations would be provided concessions for setting up ventures in the IFSC. All existing exchanges would be allowed to set up their subsidiaries in the IFSC under the relaxed regimes," Sebi Chairman U K Sinha told reporters after a meeting of Sebi's board.
Finance Minister Arun Jaitley, who also addressed Sebi's board earlier this morning, had announced in the Budget last month that India's first IFSC would be set up in GIFT City in Gujarat.
Gujarat International Finance Tec-City (GIFT City) wouldbe the country's first IFSC, with which top bourses BSE and NSE have already signed MoUs for setting up international exchanges there.
The move is e xpected to capture an estimated Rs 1,334 crore per day or Rs 2 lakh crore per year worth of trading in rupee derivatives that currently goes to locations outside India.
Presenting the Union Budget for 2015-16, Jaitley had said that appropriate regulations for IFSCs would be issued in March, which would be on the lines of global financial centres of Singapore and Dubai.
"Even though India produces some of the finest financial minds, including in international finance, they have few avenues in India to fully exhibit and exploit their strength to the country's advantage," he had said.
Under the new regime, rules and regulations differ from those applicable outside these IFSCs.
GIFT City's CEO Ramakant Jha said the new guidelines would provide a much-needed fillip to the new IFSC regime and it is a much needed step to save billions of dollars worth financial services business that India is losing out to other global hubs.
Sinha said that the IFSC regulations are basically for GIFT City in Gujarat, following the Budget announcement that it would be operational from April 1.
"We have today decided on a set of guidelines. Basically the activities which will be permitted to begin with are activities like opening a stock exchange and foreign companies can raise money in foreign currencies from there.
"Even Indians can participate subject to the requirement the liberalised remittance scheme. Legally, whatever an Indian can take out for investment in foreign currency, that money he can utilise in the IFSC. So we have provided for that. Fund management services will also be provided and a foreign corporate can raise money in IFSC in dollars.
"We will now be engaging potential intermediaries, we will be talking to them and we are willing to make further changes and amendments as and when we receive any feedback," he said.
Sinha said the exchanges are being given concessions from the existing regulations to set shop in the IFSC.
"Our capital requirement is Rs 100 crore. We have said that you can start with Rs 25 crore but you can make it up in next three years.
"Clearing corporations can start with Rs 50 crore instead of Rs 300 crore and we are giving them 3-year time frame to come.
"An Indian stock exchange recognised by us or a foreign stock exchange recognised by the regulator in its country, are eligible to set up their subsidiaries with relaxed norms to begin with.
"Shareholding pattern and demutualisation we are giving them three years time to reach the Sebi requirement but the risk management parameters will not be compromised," Sinha said.
He, however, said that the tax matters are something that needs to be addressed by the government and Sebi was not a competent authority to answer that.
The government will be coming out with its own guidelines, he added.
On shareholding pattern and demutualisation, Sebi isgiving three years time to meet its requirements but the risk management parameters will not be compromised and fully enforced, Sinha said.
BSE Brokers Forum, Vice-Chairman, Alok Churiwala welcomed the SEBI initiative on GIFT city and said that it will "usher a new chapter in the Indian Capital Markets that will garner attention of all key players in domestic and international investment circuit."