Government to lure rupee derivatives trading to Indian shores
NEW DELHI: India wants rupee derivative trading to move out of financial hubs like London, Dubai and Singapore to Indian shores.
To try and do that, a little-noticed section in a Bill introduced in this session — International Financial Services Authority (IFSA) Bill — will allow so-called international finance centres like GIFT (Gujarat International Finance Tech) city to trade in rupee derivatives without the hassles that accompany such trading in domestic markets.
Currently, the global hub for trading in rupees derivatives is London. According to a survey by the Bank for International Settlements in September, London reported daily average volumes for rupee trading at USD 46.8 in April, five times more than volumes it had reported for rupee trading in 2016.
"Rupee trading volumes abroad are a matter of concern. We will certainly be giving the IFSA powers to bring in offshore rupee derivative trading,” said a finance ministry official. Business conducted in such international financial hubs is to be subject to very lenient taxation terms, say officials.
The Bill brought before Parliament says the IFSA will be "regulating such other financial products, financial services or financial institutions in the International Financial Services Centres as may be notified by the Central Government from time to time.”Experts say this is going to be a long haul as global forex players are accustomed to playing in established money market hubs and it takes decades before a city manages to muscle into this business.“It is for no small reason that London is the preferred destination and not, say, Paris or Frankfurt, which have tried to fashion themselves as rival money markets," said Amit Banerjee, an independent merchant banker specialising in East Asian Funds.
Untill now, GIFT has not been a success story. Its location, far away from Mumbai and Kolkata, the two accepted money markets of the country have not made it popular with investors. Just about 3 million squar feet of a planned 62 million squar feet have been built in eight years.