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What are International Financial Services Centres (IFSC)?

Topics Covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

What are International Financial Services Centres (IFSC)?


An IFSC caters to customers outside the jurisdiction of the domestic economy.

  • Such centres deal with flows of finance, financial products and services across borders.
  • London, New York and Singapore can be counted as global financial centres.

Services an IFSC can provide:

  • Fund-raising services for individuals, corporations and governments.
  • Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual funds.
  • Wealth management.
  • Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms.
  • Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching.
  • Risk management operations such as insurance and reinsurance.
  • Merger and acquisition activities among trans-national corporations.

Can an IFSC be set up in a special economic zone (SEZ)?

The SEZ Act 2005 allows setting up an IFSC in an SEZ or as an SEZ after approval from the central government.

IFSCs in India:

The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.

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Why in News?

The National Stock Exchange (NSE) and Singapore Exchange (SGX) have entered into a formal agreement to cement the key terms for operationalising the NSE IFSC-SGX Connect.

●        This will bring together international and Gujarat International Finance Tec-City (GIFT) participants to create a bigger liquidity pool for Nifty products in GIFT City.

InstaLinks:

Prelims Link:

  1. What are IFSCs?
  2. Can they be set up in SEZs?
  3. India’s first IFSC.
  4. Services they provide?
  5. Limitations.

Mains Link:

Discuss the significance of international financial services centres.

Sources: the Hindu.