What are International Financial Services Centres(IFSC)?

GS Paper 2:

Topics Covered: Important International institutions.

Context:

Prime Minister Narendra Modi is set to inaugurate InFinity Forum, a thought leadership Forum on FinTech, on 3rd December.

• The event is being hosted by International Financial Services Centres Authority (IFSCA), under the aegis of Government of India in collaboration with GIFT City and Bloomberg.
• Indonesia, South Africa and the U.K. are partner countries in the first edition of the Forum.

The InFinity Forum:

• It will bring together the leading minds of the world in policy, business, and technology to discuss and come up with actionable insight into how technology and innovation can be leveraged by the FinTech industry for inclusive growth and serving humanity at large.
• The agenda of the Forum will focus on the theme of ‘Beyond’; with various sub themes including FinTech beyond boundaries, FinTech beyond Finance and FinTech Beyond Next.

The forum will witness participation from over 70 countries.

About IFSCA:

• The International Financial Services Centres Authority (IFSCA), headquartered at GIFT City, Gandhinagar Gujarat, has been established under the International Financial Services Centres Authority Act, 2019.
• It works as a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC) in India.

What is an 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.

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.