## Report on International Financial Services Centres Authority Banking Second Amendment Regulations, 2021
**1. Executive Summary:**
This report analyzes the International Financial Services Centres Authority (IFSCA) Banking Second Amendment Regulations, 2021, based solely on the official gazette notification provided. This amendment modifies the IFSCA Banking Regulations, 2020, focusing on refining the definition of IFSC Banking Units, omitting certain clauses, clarifying the role of the Home Regulator, revising capital requirements, leverage ratio, exposure ceiling, and reserve requirements, updating foreign currency account regulations, and providing further clarification on permitted activities. The key findings indicate a move towards greater clarity, regulatory alignment, and operational flexibility for Banking Units within the IFSC framework.
**2. Introduction:**
The purpose of this report is to provide an informative analysis of the International Financial Services Centres Authority Banking Second Amendment Regulations, 2021. The analysis is based exclusively on the provided government policy text and aims to outline the key changes, potential impacts, and relevant implementation aspects.
**3. Policy Overview:**
* This is an **Amendment** to the International Financial Services Centres Authority Banking Regulations, 2020.
* **Core Objective(s):** Based on the provided text, the core objectives of the amendments appear to be:
* To refine and clarify the regulatory framework for Banking Units operating within the IFSC.
* To provide greater operational flexibility and clarity regarding permissible activities.
* To align regulations with international best practices and the oversight of Home Regulators where applicable.
* To refine reserve requirements based on the source of deposits.
**4. Background and Rationale:**
This amendment is likely intended to address specific operational challenges or areas of ambiguity identified within the existing IFSCA Banking Regulations, 2020. The changes suggest a desire to streamline operations, reduce redundancies (by omitting clauses), and enhance the regulatory framework's responsiveness to the evolving needs of IFSC Banking Units and the broader financial landscape. The explicit mention of “Home Regulator” and adjustments to capital and reserve requirements points towards a need for clearer regulatory oversight and operational conditions.
**5. Key Provisions / Changes:**
The following summarizes the key changes introduced by the amendment:
* **Definition of IFSC Banking Unit:** The definition of "IFSC Banking Unit or Banking Unit" is substituted to mean a financial institution under clause c of subsection 1 of Section 3 of the Act that is licensed by the Authority to undertake permissible activities under these regulations. This seems to clarify which type of entity can undertake permissible activities.
* **Omission of Clauses:** Clauses e, g, k, and l in subregulation 1 of regulation 2 are omitted. The text does not reveal the content of these clauses, so the impact of their removal cannot be determined from the provided information.
* **Home Regulator Definition:** A new clause (ea) is inserted, defining "Home Regulator" as the regulatory authority responsible for regulating the Parent Bank in its jurisdiction. This indicates a greater emphasis on the role and recognition of the Parent Bank's existing regulatory oversight.
* **Capital Requirements:** Subregulation 3(a) of regulation 3 is substituted, stating that the Parent Bank shall provide necessary capital for the BU, subject to a minimum of USD 20 million or such other level of capital that may be specified by the Authority. Such capital shall be maintained at the Parent Bank in the manner as specified by the Authority. This clarifies the source of capital and potentially provides flexibility for the Authority to adjust the minimum capital requirement.
* **Compliance with Home Regulator:** Subregulation 2 of regulation 4 is substituted, stating that Banking Units shall continue to comply with the directions and instructions issued by their Home Regulator, unless otherwise specified by the Authority. This reinforces the primary role of the Home Regulator while allowing the Authority to override these directions if necessary.
* **Leverage Ratio:** Regulation 6 is substituted to state that Banking Unit shall adhere to the norms and guidelines relating to leverage ratio as may be specified by the Authority, from time to time.
* **Exposure Ceiling:** Regulation 7 is substituted to state that Banking Unit shall adhere to the norms and guidelines relating to exposure ceiling as may be specified by the Authority, from time to time.
* **Reserve Requirements:** Regulation 8 is substituted to state that The liabilities of a Banking Unit, other than the deposits raised from individuals resident in India or outside India, shall be exempt from Cash Reserve Ratio or other such requirements. The deposits raised from individuals resident in India or outside India shall be subject to such reserve ratios as may be specified by the Authority. This introduces a distinction in reserve requirements based on the residency status of individual depositors.
* **Foreign Currency Accounts:** Regulation 11 is substituted to state that Banking Units may open accounts in a freely convertible foreign currency for individuals and corporate or institutional entities, resident in India or outside India, subject to such conditions as may be specified by the Authority and Individuals who are person resident in India are permitted to open, hold and maintain accounts in a freely convertible foreign currency, with a Banking Unit, for undertaking transactions connected with or arising from any permissible current or capital account transaction or a combination of both as specified in the Liberalised Remittance Scheme LRS of the Reserve Bank.
* **Permitted Activities:** Regulation 13 is substituted to state that Banking Units may undertake any or all of the activities mentioned under clause e of subsection 1 of Section 3 of the Act or Section 6 of the Banking Regulation Act, 1949, except those expressly prohibited by the Authority, subject to compliance with such terms and conditions or guidelines as may be specified by the Authority, including matters relating to design, execution and risk management. This broadens the scope of permissible activities unless explicitly restricted, providing more flexibility.
**6. Target Audience and Stakeholders:**
Based on the provided text, the primary target audience and stakeholders are:
* IFSC Banking Units and their Parent Banks.
* The International Financial Services Centres Authority (IFSCA).
* Home Regulators of Parent Banks.
* Individuals and corporate/institutional entities, resident in India or outside India, who may hold accounts with Banking Units.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The International Financial Services Centres Authority (IFSCA) is the primary body responsible for implementing and overseeing these regulations. The Home Regulators of Parent Banks will also play a role in ensuring compliance with their respective regulations, where applicable.
* **Timelines/Procedures:** The regulations came into force on the date of their publication in the Official Gazette (July 6, 2021). Specific procedures for compliance with the revised capital, leverage ratio, exposure ceiling, and reserve requirements, and other operational guidelines are expected to be detailed separately by the Authority.
* **Amendment Specific Implementation:** Banking Units will need to review and adjust their operations to align with the new definitions, capital requirements, reserve ratio distinctions, foreign currency accounts and the broader scope of permissible activities. They also need to ensure adherence to the directives of their Home Regulators, unless specifically overridden by the Authority.
**8. Expected Outcomes / Impact of Changes:**
The likely intended outcomes of these amendments are:
* **Greater Clarity and Flexibility:** The revised definitions and permitted activities aim to provide greater clarity and operational flexibility for Banking Units.
* **Enhanced Regulatory Oversight:** The explicit recognition of Home Regulators should lead to more coordinated and effective regulatory oversight.
* **Optimized Capital and Reserve Management:** The refined capital and reserve requirements should allow for more efficient capital allocation and reserve management.
* **Increased Competitiveness:** By streamlining regulations and providing more flexibility, the amendments may enhance the competitiveness of IFSC Banking Units.
* **Improved Risk Management:** The emphasis on compliance with Home Regulator directives and the Authority's guidelines should contribute to improved risk management practices.
**9. Conclusion:**
The International Financial Services Centres Authority Banking Second Amendment Regulations, 2021, represent a significant step in refining the regulatory landscape for Banking Units operating within the IFSC. The amendments address key areas such as definitions, capital requirements, permitted activities, and regulatory oversight, aiming to create a more efficient, competitive, and well-regulated environment. These changes are expected to have a positive impact on the operations of Banking Units and contribute to the overall success of the IFSC.
Key Entities Referenced
NEW DELHI: Place of publication of the Gazette of India. It is the capital of India.
ASHADHA: A month in the Hindu calendar, corresponding to June-July in the Gregorian calendar.
THE GAZETTE OF INDIA: Official government gazette of India, publishing important notifications and regulations.
Gandhinagar: City in Gujarat, India. Location of the International Financial Services Centres Authority.
International Financial Services Centres Authority: Regulatory authority that makes the regulations mentioned in the notification.
International Financial Services Centres Authority Act, 2019: The act that confers powers to the International Financial Services Centres Authority.
International Financial Services Centres Authority Banking Regulations, 2020: Regulations that are being amended by this notification.
International Financial Services Centres Authority Banking Second Amendment Regulations, 2021: The regulation that is being enacted through this notification.
IFSC Banking Unit or Banking Unit: Defined as a financial institution licensed by the Authority to undertake permissible activities under these regulations.
Home Regulator: The regulatory authority responsible for regulating the Parent Bank.
Parent Bank: The bank that the Home Regulator regulates.
Reserve Bank: Central Bank of India
Liberalised Remittance Scheme: Scheme of the Reserve Bank.
INJETI SRINIVAS: Chairperson of the International Financial Services Centres Authority.
Banking Regulation Act, 1949: Act of Parliament in India that regulates the Indian banking sector.
Mayapuri, New Delhi: Location of the Government of India Press.
Delhi: Place where the Controller of Publications is located.
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99
सी.जी.-डी.एल.-अ.-06072021-228147
xxxGIDHxxx
CG-DL-E-06072021-228147
xxxGIDExxx
असाधारण
EXTRAORDINARY
भाग III—खण् ड 4
PART III—Section 4
प्राजधकार स ेप्रकाजित
PUBLISHED BY AUTHORITY
स.ं 278] नई क्रदल्ली, मगं लिार, िुलाई 6, 2021/आषाढ़ 15, 1943
No. 278] NEW DELHI, TUESDAY, JULY 6, 2021/ASHADHA 15, 1943
अतं रराष्ट्रीय जित्तीय सिे ा केन्द्र प्राजधकरण
अजधसचू ना
गांधीनगर, 5 िलु ाई, 2021
अतं रराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण (बकैं कारी) (दसू रा सिं ोधन) जिजनयम, 2021
आई.एफ.एस.सी.ए./2021-22/िी.एन./रेग्य.ु13.—अंतरराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण, अंतरराष्ट्रीय जित्तीय
सेिा केन्द्र प्राजधकरण अजधजनयम, 2019 की धारा 12 की उपधारा (1) और धारा 13 की उपधारा (1) के साथ पठित धारा
28 की उपधारा (1) द्वारा प्रदत्त िजियों का प्रयोग करते हुए, अंतरराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण (बैंककारी)
जिजनयम, 2020 का और संिोधन करने के जलए जनम्नजलजखत जिजनयम बनाता ह,ै अथाात्:—
1. (1) इन जिजनयमों का संजिप्त नाम अतं रराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण (बैंककारी)(दसू रा संिोधन) जिजनयम,
2021 ह ै।
(2) य ेरािपत्र में उनके प्रकािन की तारीख को प्रिृत्त होंग े।
2. अंतरराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण(बैंककारी) जिजनयम, 2020 (यथा-संिोजधत) (जिन्द्ह ें इसमें से पश्चात् मलू
जिजनयम कहा गया ह,ै के जिजनयम 2 के उप-जिजनयम (1) के खंड (ग) के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाता :् —
(ग) “ आई.एफ.एस.सी.बैंककारी यूजनट” या “बैंककारी यूजनट” से अजधजनयम की धारा 3 की उपधारा (1) के खंड (ग)
के अधीन कोई ऐसी जित्तीय संस्ट्था अजभप्रेत ह,ै िो प्राजधकरण द्वारा इन जिजनयमों के अधीन अनज्ञु ेय क्रियाकलाप
करने के जलए अनज्ञु प्त ह;ै
3737 GI/2021 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC.4]
3. मलू जिजनयमों के जिजनयम 2 के उप-जिजनयम (1) में, खंड (ङ), (छ), (ट) और (ि) का लोप क्रकया िाएगा ।
4. मूल जिजनयमों में, जिजनयम 2 के उप-जिजनयम (1) के खडं (ङ) के पश्चात् जनम्नजलजखत खंड अतं ःस्ट्थाजपत क्रकया
िाएगा, अथाात:् —
“(ङक) “गृह जिजनयामक” से ऐसा जिजनयमनकारी प्राजधकारी अजभप्रेत ह,ै िो उस अजधकार-िेत्र में, िहां मलू
बैंक जनगजमत, अनुज्ञप्त या स्ट्थाजपत ह,ै मलू बैंक के जिजनयमन के जलए उत्तरदायी ह;ै ”
5. मूल जिजनयमों के जिजनयम 3 के उप-जिजनयम (3) के खडं (क) के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाात्:—
“(क) मलू बैंक, बैंककारी यूजनट के जलए, न्द्यूनतम 2 करोड़ अमरीकी डालर या पूंिी के ऐसे अन्द्य स्ट्तर के अधीन
रहते हुए, िो प्राजधकरण जिजनर्दष्टा करे, आिश्यक पूंिी उपलब्ध कराएगा । ऐसी पूंिी, मूल बैंक में उस रीजत में बनाए
रखी िाएगी, िैसा प्राजधकरण जिजनर्दष्टा करे ।”
6. मूल जिजनयमों के जिजनयम 4 के उप-जिजनयम (2) के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाात्:—
“(2) बैंककारी यूजनट, िब तक क्रक प्राजधकरण द्वारा अन्द्यथा जिजनर्दष्टा न क्रकया िाए, अपन े गृह जिजनयामक
द्वारा िारी क्रकए गए जनदिे ों और अनुदेिों का अनपु ालन करते रहगें े।”
7. मूल जिजनयमों में, जिजनयम 6 के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाात्:—
“6. लीिरेि अनपु ात बनाए रखना
बैंककारी यूजनट, लीिरेि अनुपात से संबंजधत उन मानदडं ों और क्रदिाजनदेिों का पालन करेगा, िो प्राजधकरण समय-
समय पर जिजनर्दष्टा करे ।”
8. मूल जिजनयमों में, जिजनयम 7 के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाात:् —
“7. एक्सपोज़र की अजधकतम सीमा
बैंककारी यूजनट, एक्सपोज़र की अजधकतम सीमा से संबंजधत उन मानदंडों और क्रदिाजनदेिों का पालन करेगा, िो
प्राजधकरण समय-समय पर जिजनर्दष्टा करे ।”
9. मूल जिजनयमों में, जिजनयम 8 के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाात:् —
“8. आरजिजत अपिे ाए ं
बैंककारी यूजनट के दाजयत्ि, भारत में या भारत के बाहर जनिासी व्यजष्टयों से िुटाए गए जनिेपों से जभन्न, नकद
आरजिजत अनपु ात या ऐसी अन्द्य अपिे ाओं स े छूटप्राप्त होंग े । भारत म ें या भारत के बाहर जनिासी व्यजष्टयों से िुटाए
गए जनिपे ऐसे आरजिजत अनुपातों के अध्यधीन होंगे, िो प्राजधकरण जिजनर्दष्टा करे ।”
10. मूल जिजनयमों में, जिजनयम 11 के स्ट्थान पर जनम्नजलजखत रखा िाएगा, अथाात्:—
“11. जिदेिी मरु ा खात े
(1) बैंककारी यूजनट, भारत म ें या भारत के बाहर जनिासी व्यजष्टयों और जनगजमत या संस्ट्थागत इकाइयों के जलए,
ऐसी ितों के अधीन रहत े हुए, िो प्राजधकरण जिजनर्दष्टा करे, क्रकसी जनबााध संपठरितानीय जिदेिी मुरा में खाता खोल
सकेंगे ।
(2) ऐसे व्यजष्ट, िो भारत में जनिासी व्यजि ह,ैं क्रकसी अनुज्ञेय चालू या पूंिीगत लेखा संव्यिहार या दोनों के संयोिन
से, िैसा भारतीय ठरििा बैंक की उदारीकृत प्रेषण स्ट्कीम (एल.आर.एस.) में जिजनर्दष्टा क्रकया िाए, संसि या उनसे
उद्भूत होने िाले संव्यिहार करने के जलए क्रकसी बैंककारी यूजनट में क्रकसी जनबााध संपठरितानीय जिदेिी मुरा में खाता
खोलने, धाठरत करन े या बनाए रखने के जलए अनज्ञु ात ह ैं।”
11. मलू जिजनयमों म,ें जिजनयम 13 के स्ट्थान पर जनम्नजलजखत जिजनयम रखा िाएगा, अथाात्:—
“13. अनज्ञु ात क्रियाकलाप
कोई बैंककारी यूजनट, ऐसे जनबंधनों और ऐसी ितों या ऐसे क्रदिाजनदेिों के अनपु ालन के अधीन रहत े हुए, िो
प्राजधकरण जिजनर्दष्टा करे, अजधजनयम की धारा 3 की उपधारा (1) के खडं (ङ) या बैंककारी जिजनयमन अजधजनयम,
1949 की धारा 9 के अधीन उजल्लजखत कोई या सभी क्रियाकलाप, प्राजधकरण द्वारा अजभव्यि रूप से प्रजतजषद्ध
क्रियाकलापों को छोड़कर, कर सकेगा, जिसके अतं गता जडिाइन, जनष्पादन और िोजखम प्रबधं न से संबंजधत जिषय भी
ह ैं।”
इनिेती श्रीजनिास, अध्यि
[जिज्ञापन-III/4/असा./143/2021-22][भाग III—खण् ड 4] भारत का रािपत्र : असाधारण 3
ठटप्पण:
1. अंतरराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण (बैंककारी) जिजनयम, 2020, भारत के रािपत्र, असाधारण में अजधसूचना सं.
आई.एफ.एस.सी.ए./2020-21/िी.एन./रेग्यु004 द्वारा तारीख 20 निम्बर, 2020 को प्रकाजित क्रकए गए थे, जिन्द्ह ें भारत के
रािपत्र में अजधसूचना सं. सी.िी-एम.एच.-ई-12052021-226980 द्वारा तारीख 12 मई, 2021 को प्रकाजित अंतरराष्ट्रीय
जित्तीय सेिा केन्द्र प्राजधकरण के िुजद्धपत्र के साथ पढ़ा िाना है; और
2. अंतरराष्ट्रीय जित्तीय सेिा केन्द्र प्राजधकरण (बैंककारी) (संिोधन) जिजनयम, 2021 भारत के रािपत्र, असाधारण में अजधसूचना सं.
आई.एफ.एस.सी.ए./2020-21/िी.एन. /रेग्यु009 द्वारा तारीख 25 माचा, 2021 को प्रकाजित क्रकए गए थे ।
INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY
NOTIFICATION
Gandhinagar, the 5th July, 2021
International Financial Services Centres Authority (Banking) (Second Amendment) Regulations, 2021
IFSCA/2021-22/GN/REG013.—In exercise of the powers conferred by sub-section (1) of section 28 read
with sub-section (1) of Section 12 and sub-section (1) of Section 13 of the International Financial Services Centres
Authority Act, 2019, the International Financial Services Centres Authority hereby makes the following regulations,
further to amend the International Financial Services Centres Authority (Banking) Regulations, 2020 (as amended),
namely:—
1. (1) These regulations may be called the International Financial Services Centres Authority (Banking)
(Second Amendment) Regulations, 2021.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the International Financial Services Centres Authority (Banking) Regulations, 2020 (as amended)
(hereinafter referred to as the Principal Regulations), clause (c) of sub regulation (1) of regulation 2 shall be
substituted by the following, namely,—
“(c) “IFSC Banking Unit” or “Banking Unit” means a financial institution under clause (c ) of sub-section (1)
of Section 3 of the Act that is licensed by the Authority to undertake permissible activities under these
regulations;”
3. In the Principal Regulations, the clauses (e), (g), (k) and (l) in sub-regulation (1) of regulation 2 shall be
omitted.
4. In the Principal Regulations, after clause (e) of sub-regulation (1) of regulation 2, following clause shall be
inserted, namely,—
“(ea) “Home Regulator” means the regulatory authority that is responsible for regulating the Parent Bank in
the jurisdiction where the Parent Bank is incorporated, licensed or established;”
5. In the Principal Regulations, clause (a) of sub-regulation (3) of regulation 3 shall be substituted, by the
following, namely,—
"(a) The Parent bank shall provide necessary capital for the BU, subject to a minimum of USD 20 million or
such other level of capital that may be specified by the Authority. Such capital shall be maintained at the
Parent Bank in the manner as specified by the Authority."
6. In the Principal Regulations, sub-regulation (2) of regulation 4 shall be substituted by the following,
namely,—
" (2) Banking Units shall continue to comply with the directions and instructions issued by their Home
Regulator, unless otherwise specified by the Authority."4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC.4]
7. In the Principal Regulations, the regulation 6 shall be substituted by the following, namely,—
“6. Maintenance of Leverage Ratio
Banking Unit shall adhere to the norms and guidelines relating to leverage ratio as may be specified by the
Authority, from time to time.”
8. In the Principal Regulations, the regulation 7 shall be substituted by the following, namely,—
“7. Exposure ceiling
Banking Unit shall adhere to the norms and guidelines relating to exposure ceiling as may be specified by the
Authority, from time to time.”
9. In the Principal Regulations, the regulation 8 shall be substituted by the following, namely,—
“8. Reserve requirements
The liabilities of a Banking Unit, other than the deposits raised from individuals resident in India or outside
India, shall be exempt from Cash Reserve Ratio or other such requirements. The deposits raised from
individuals resident in India or outside India shall be subject to such reserve ratios as may be specified by the
Authority.”
10. In the Principal Regulations, the regulation 11 shall be substituted by the following, namely,—
"11. Foreign Currency Accounts
(1) Banking Units may open accounts in a freely convertible foreign currency for individuals and corporate
or institutional entities, resident in India or outside India, subject to such conditions as may be specified
by the Authority.
(2) Individuals who are person resident in India are permitted to open, hold and maintain accounts in a
freely convertible foreign currency, with a Banking Unit, for undertaking transactions connected with or
arising from any permissible current or capital account transaction or a combination of both as specified
in the Liberalised Remittance Scheme (LRS) of the Reserve Bank."
11. In the Principal Regulations, for the regulation 13, the following regulation shall be substituted, namely:
"13. Permitted Activities
Banking Units may undertake any or all of the activities mentioned under clause (e) of sub-section (1) of
Section 3 of the Act or Section 6 of the Banking Regulation Act, 1949, except those expressly prohibited by
the Authority, subject to compliance with such terms and conditions or guidelines as may be specified by the
Authority, including matters relating to design, execution and risk management."
INJETI SRINIVAS, Chairperson
[ADVT.-III/4/Exty./143/2021-22]
Note:
1. The International Financial Services Centres Authority (Banking) Regulations, 2020 were published in the
Gazette of India Extraordinary vide notification No. IFSCA/2020-21/GN/REG004 on 20th November 2020, to
be read with the International Financial Services Centres Authority Corrigendum published in the Gazette of
India Extraordinary vide notification No. CG-MH-E-12052021-226980, on 12th May, 2021; and
2. The International Financial Services Centres Authority (Banking) (Amendment) Regulations, 2021 were
published in the Gazette of India Extraordinary vide notification No. IFSCA/2020-21/GN/REG009 on
25th March, 2021.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.