It is only set to accelerate with the likes of Deutsche, HSBC, Citigroup, Bank of America, Standard Chartered and Barclays opening up offices to facilitate rising Indian trade and capital movement.
GIFT City, India’s obstacle-free gateway to the world of exotic and complex global finance, has gained sufficient traction in the past two years to achieve what was considered improbable a decade ago, with tweaks to existing rules helping the facility rival global hubs and draw business that was earlier only an overseas monopoly.
The number of entities surged to around 260 until August across the special economic zone this year from 140 in 2019, with banking transactions crossing the $100 billion mark in July. It is only set to accelerate with the likes of Deutsche, HSBC, Citigroup, Bank of America, Standard Chartered and Barclays opening up offices to facilitate rising Indian trade and capital movement.
“The vision is to make GIFT City not only the gateway for India’s trade in International financial services, but to also develop it as a competitive platform for the entire region in this regard,” said Tapan Ray, managing director at GIFT City.
Large corporations, including Mahindra & Mahindra, Reliance Industries, Larsen & Toubro, Tata Steel and the Adani group, have transacted in GIFT.
Way back in 2006-07, GIFT City in Gujarat was conceived by the then chief minister – and now Prime Minister – Narendra Modi. His vision was to create an international financial hub that would ultimately rival similar centres at Singapore, Hong Kong, London and New York.
It started as a joint venture between IL&FS, an infrastructure conglomerate, and the government of Gujarat with equal shareholding. The initial capital outlay was Rs 65 crore from the two partners.
“As a prerequisite to attracting global players, the Initial focus was to create a world-class physical infrastructure,” said Ray.
However, the proposed hub did not take off immediately. The global financial crisis of 2007-2008 did not help matters as the initial enthusiasm of potential investors waned.
It was only in Dec 2011 that GIFT SEZ received the status of an International Financial Services Centre (IFSC), which was to be India’s tax-free gateway to the global financial world.
After 2014, the initial framework of the GIFT IFSC was set up with regulations emanating from the Reserve Bank of India, the Securities Exchange Board of India and Insurance Regulatory Authority of India (IRDA). There was a need to put in place a uniform regulatory framework.
Meanwhile, another crisis – of IL&FS imploding in the fall of 2018 – clouded its prospects.
“The issue of credibility of the joint venture was at stake with the financial unwinding of IL&FS,” said Ray who was former secretary of the Corporate Affairs ministry prior to taking over at GIFT City in June, 2019.
Prime Minister Narendra Modi sought to revive the fortunes of the special economic zone. Later, the GUDC (Gujarat Urban Development Corporation) bought the remaining 50% stake from IL&FS on a par in June 2020.
The bill for creating the unified regulator, International Financial Services Authority, was passed by both houses of parliament in the winter session of 2019.
Indian companies with a global footprint have raised over $37 billion in the past 14 months from the GIFT City, underscoring the role of the financial hub in bringing home much of the business previously done exclusively overseas.
Recently, the Development Commissioner at GIFT SEZ considered nearly two dozen applications for setting up IFSC business in the facility, setting a record for India’s maiden IFSC.
Some of the leading institutions that applied for fund business recently include Nippon Life India Asset Management, Kotak Investment Advisors and Blume Venture Fund.
Banking transactions include external commercial borrowing, foreign currency term loan and trade finance. Bank of Baroda, HDFC Bank, ICICI Bank, Axis Bank, Tata Consultancy Services and Oracle were among the early users of the facility between 2015 and 2017.
https://cfo.economictimes.indiatimes.com/news/gift-city-gains-momentum-thanks-to-regulatory-changes/85291672
