Dollar or pound, get a GIFT in any currency!

Indian corporate houses looking for mergers and acquisitions overseas or financial institutions in need of foreign exchange, may not have to tie up with foreign banks any longer just for funding in foreign exchange.

The Union Ministry of Commerce and Industry has given its approval to the Gujarat International Finance Tec-City (GIFT) SEZ, Gandhinagar, for setting up the first operational International Financial Services Centre (IFSC) in the country.

Now, instead of setting up branches in other countries, banks or companies just need to visit GIFT SEZ to conduct their business in international currency denominations.

RK Jha, director-in-charge of GIFT Company Ltd, confirmed this development.

“This will be the first operational IFSC in the country and it will facilitate financial services for Indian entities across the world. Now that the Union ministry has given its go-ahead, we will be showcasing GIFT with the IFSC to major financial institutions across the globe and invite them to set up their offices in GIFT SEZ,” Jha said.

Many financial hubs of the world, including Singapore, Hong Kong, London and New York, have IFSCs. Listing out the benefits of having an IFSC, Jha said they contribute 10-50% to the economy of their respective cities once they are fully developed. “IFSCs bring in skilled manpower and create employment opportunities,” Jha said.

Explaining how IFSCs function, Jha said that, today, if a company needs a loan in US dollars for its merger & acquisition operations in the United States, it has to approach foreign banks for funding in foreign exchange.    

"Similarly, Indian banks need to set up branches in the US or UK so that they are able to provide loans in dollars or pounds. The benefit of having an IFSC is that banks will be able to open offices in GIFT and conduct business in foreign currencies without having to open branches abroad," he said.  The IFSC will provide a platform not only for banks but also for global insurance companies and international stock exchanges. However, all these transactions will need to follow guidelines of respective regulators such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority (Irda).

Currently, GMR SEZ in Hyderabad has received approval for setting up an IFSC but the decision has not yet been notified by the Union ministry of commerce and industry. However, with the approval to the IFSC in GIFT SEZ, it has become the first 'operational' IFSC of the country.