22 February 2024 | By INDIE
Heard about India's latest financial centre, GIFT IFSC? It's a massive project that will change how we see the Indian financial landscape! This centre, located in Gujarat, will offer a world-class platform for international financial services companies, creating job opportunities for highly skilled professionals.
Spread across 886 acres, GIFT IFSC is set to become a hub for offshore banking, fund management, and other financial services. And you know what's even more exciting? Big names like JPMorgan Chase and HSBC are already on board!
The best part? The centre promises a business-friendly environment with reduced regulations and taxes to attract investments and enterprises.
One of the things to note about GIFT City is that it aims to become a "sandbox" for fintech innovation and attract significant funds to India's onshore markets. With its strategic location and favourable regulatory framework, GIFT IFSC is expected to attract massive foreign investment and drive economic growth in India.
In this article, we will explore how the GIFT IFSC functions and what it means for the Indian economy.
Gujarat International Financial Tec-City (GIFT City), the first International Financial Services Centre (IFSC) was established in 2015. It's India's answer to the financial powerhouses of London, New York, and Singapore, but with a unique twist. GIFT City isn’t just about banking, it’s a bustling hub where insurance, capital markets, asset management, and more come together.
Now let’s talk numbers.
The current turnover of the city is a whopping $3.8 trillion! 24 banks are processing an astounding $422 billion in transactions. 23 insurance and intermediary companies are crushing $202 million in gross premiums. As for the alternative investment funds, they’re looking after an enormous $20 billion in assets.
Not only that, but the city is home to three significant exchanges (India INX, GIFT Nifty, and India International Bullion Exchange) with a total trading turnover of around $4 trillion.
Financial companies, investors, and service providers can take advantage of the planned infrastructure, and digitised ecosystem in the following ways:
● Ease Of Doing Business
You can enjoy a hassle-free experience with a single-window clearance for all approvals. RBI, SEBI and IRDAI have combined to form a new organisation called the International Financial Service Centres Authority (IFSCA).
This new authority has been given the power to control and manage financial products and services, such as gold depository receipts and gold spot delivery contracts.
● Tax Incentives
It offers tax benefits such as:
● Other Incentives
The Gujarat state offers various incentives such as EPF reimbursement, lease rental subsidy, power subsidy, etc. You can get an exemption from stamp duty and registration charges and easily set up your business with plug-and-play infrastructure.
The area offers a sustainable development model with a 20% reduction in operating costs, ensuring comparable cost efficiency.
The GIFT IFSC launch allows India to enter the global financial services market and grow its economy. It can attract foreign investment and become a major player in international finance by helping foreign financial institutions set up in India.
Think of the GIFT IFSC this way – it's not just any financial hub. It's a game-changer waiting to shake up India's financial scene.
How, you ask? By sparking competition, promoting innovation, and creating many job opportunities for finance and tech geniuses.
All the big players in the BFSI space are already in on the action. Five of the world's top ten banks, and Indian banks have snagged licences to set up shop in GIFT IFSC. As of July 2023, the total asset size was $41.20 billion!
Indian borrowers also get a sweet deal with a 5% tax rate on interest for external commercial borrowing (ECB). But heads up, this tax party shifted gears, moving to 20% or as per tax slabs from July 1, 2023.
But that's not all. The Finance Ministry is giving the green light for Indian entities to list on international exchanges, including IFSC exchanges.
Think of the possibilities! Indian companies have already listed bonds worth a whopping $52 billion, paving the way for serious growth.
GIFT IFSC is doing its bit to stop money from leaving India by providing various financial services within the country. This is great news for Indian economic growth as domestic companies and investors will be encouraged to keep their money in the country.
As of 3rd July 2023, the trading of the SGX Nifty shifted on NSE's International Exchange (NSE IX) enclosed within GIFT IFSC. No more Singaporean transactions! This means more globally recognised securities can be listed on GIFT NIFTY.
The current daily turnover of SGX Nifty stands at $10 billion! Plus, listed derivatives on NSE IX have an exemption from Indian income tax, making them a tempting investment option for traders.
It has plans to expand offerings, including a regulatory framework for Indian firms' direct equity listing on GIFT City exchanges. The merger of India INX and GIFT Nifty international exchanges will enable direct equity listing of Indian companies on the exchange. It'll help increase trade volumes, eliminate the need for global depository receipts, and allow companies to raise capital in foreign markets.
GIFT IFSC is also home to around 50 Alternate Investment Funds (AIFs) that manage accounts worth over $17.8 Billion. Now, there's a new system in place for Family Investment Funds (FIFs), which lets Indian residents set up their overseas investment accounts.
To do so, they need:
● A license from IFSCA
● A minimum of $10 million to invest over three years
● At least one person in charge
The launch of GIFT IFSC holds immense significance for India and its aspiration to become a leading global financial hub. It will allow India to expand its presence in the global financial services market and address the issue of capital moving out.
With the presence of global financial institutions, GIFT IFSC will encourage competition, promote innovation, and create job opportunities.
If you’d like to explore more financial products and services, start your journey with INDIE by IndusInd Bank today!
