Topics Covered: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
IFSCA introduces Framework for Regulatory Sandbox:
Context:
The International Financial Services Centres Authority (IFSCA) has introduced a framework for “Regulatory Sandbox”.
Firstly, what is a regulatory sandbox?
It is a safe harbour, where businesses can test innovative products under relaxed regulatory conditions.
- Typically, participating companies release new products in a controlled environment to a limited number of customers for a limited period of time.
Now, under the new framework released by IFSCA:
- The Regulatory Sandbox shall operate within the IFSC located at GIFT City.
- Entities operating in the capital market, banking, insurance and financial services space shall be granted certain facilities and flexibilities to experiment with innovative FinTech solutions in a live environment with a limited set of real customers for a limited time frame.
- These features shall be fortified with necessary safeguards for investor protection and risk mitigation.
About the International Financial Services Centres Authority:
- It is a statutory body established in 2020.
- It works under the Department of Economic Affairs, Ministry of Finance.
- Headquartered in Gandhinagar, Gujarat.
Roles and functions:
- Its main function is to develop and regulate the financial products, financial services and financial institutions located/performed in the International Financial Services Centres in India.
- The Authority is empowered to exercise the powers of RBI, SEBI, IRDAI and PFRDA in respect of financial services, financial products and financial institutions performed/located in the international financial services centres in the country.
Composition:
Chairperson, one Member each to be nominated by the Reserve Bank of India (RBI), the Securities Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA), two members to be dominated by the Central Government and two other whole-time or full-time or part-time members.
- They will have a three-year term subject to reappointment.
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.
InstaLinks:
Prelims Link:
- What are IFSCs?
- Can they be set up in SEZs?
- India’s first IFSC.
- Services they provide?
- What is a regulatory sandbox?
Mains Link:
Discuss the significance of international financial services centres.
Sources: PIB.
