Prelims Syllabus : Institutional Reforms Mains Syllabus : GS-II Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
Why in News?
- Recently, the central government has established International Financial Services Centres Authority to regulate all financial services in International Financial Services Centres (IFSCs) with headquarters in Gandhinagar (Gujarat).
About International Financial Services Centre (IFSC):
- It enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of Financial Institutions (such as banks, insurance companies, etc.) to India.
- It offers a business and regulatory environment that is comparable to other leading international financial centres in the world like London and Singapore.
- It intended to provide Indian corporates with easier access to global financial markets, and to complement and promote further development of financial markets in India.
- The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.
About International Financial Services Centres Authority:
- They will regulate financial products such as securities, deposits or contracts of insurance, financial services, and financial institutions which have been previously approved by any appropriate regulator such as Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) etc., in an IFSC.
- They will also regulate any other financial products, financial services, or financial institutions in an IFSC, which may be notified by the Central Government.
- They may also recommend to the central government any other financial products, financial services, or financial institutions, which may be permitted in an IFSC.
Composition of Members:
- It consists of nine members, appointed by the central government.
- It includes chairperson of the authority, a member each from the RBI, SEBI, the Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory and Development Authority (PFRDA); and two members from the Ministry of Finance. In addition, two other members will be appointed on the recommendation of a Selection Committee.
- The term of all members of the IFSC Authority will be three years, subject to Reappointment.
Advantage of IFSC:
- The banking, capital markets and insurance sectors in IFSC which are regulated by multiple regulators – the RBI, SEBI, and IRDAI will be unified under the IFSC authority.
- Both national and international institutions dealing with international financial services would utilise the IFSC platform for inbound and outbound investments with improved ease of doing business, thereby making GIFT IFSC a Global Financial Hub.