Notification of Operating Lease as Financial Product under International Financial Services Centres Authority Act, 2019

## Report on Notification Regarding Operating Leases as Financial Products **1. Executive Summary:** This report analyzes a notification (S.O. 5199(E)) issued by the Ministry of Finance, Department of Economic Affairs, on December 14, 2021. The notification designates "operating lease including any hybrid of operating and financial lease of such product or equipment as may be specified by International Financial Services Centres Authority" as a financial product under the International Financial Services Centres Authority Act, 2019. This change empowers the International Financial Services Centres Authority to further define and regulate operating leases within its jurisdiction. **2. Introduction:** This report provides an overview and analysis of a notification issued by the Ministry of Finance, Department of Economic Affairs. The purpose of this report is to inform stakeholders about the implications of this notification based solely on the text provided. **3. Policy Overview:** This is a *new* policy notification issued under the International Financial Services Centres Authority Act, 2019. The core objective, as inferred from the text, is to expand the scope of financial products regulated by the International Financial Services Centres Authority to include operating leases and related hybrids. **4. Background and Rationale:** As this is a new notification adding a product to the definition of "financial product", the likely rationale is to bring operating leases under the regulatory purview of the International Financial Services Centres Authority (IFSCA). This suggests that the government intends to promote or manage operating lease activities within International Financial Services Centres (IFSCs), possibly to attract investment, standardize practices, or mitigate potential risks associated with these types of leases. **5. Key Provisions / Changes:** This notification establishes that "operating lease including any hybrid of operating and financial lease of such product or equipment as may be specified by International Financial Services Centres Authority" is to be considered a financial product. * **What the policy establishes:** This notification formally classifies operating leases (including hybrid structures) as financial products. The IFSCA is then empowered to specify the types of products or equipment that are subject to this classification. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders affected by this policy include: * Businesses engaged in operating lease activities within International Financial Services Centres (IFSCs). * The International Financial Services Centres Authority (IFSCA) itself, as it gains regulatory responsibility over operating leases. * Financial institutions involved in financing or structuring operating lease transactions. * Legal and financial professionals advising on operating leases in IFSCs. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The International Financial Services Centres Authority (IFSCA) is the primary agency responsible for implementing the policy. The notification explicitly gives the IFSCA the power to specify the products and equipment that fall under this definition. * **Timelines/Procedures:** The notification comes into force on the date of its publication in the Official Gazette (December 14, 2021). The specific procedures for implementation will likely be defined by the IFSCA in subsequent regulations or guidelines. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes of this notification are: * Increased regulatory oversight of operating lease activities within IFSCs. * Standardization of operating lease practices through IFSCA regulations. * Attraction of more operating lease business to IFSCs, potentially boosting investment and economic activity. * Greater clarity and legal certainty regarding the treatment of operating leases in IFSCs. * Potential for innovative financial product development around operating leases within the IFSC framework. **9. Conclusion:** The notification issued by the Ministry of Finance classifying operating leases as financial products is a significant development for the International Financial Services Centres (IFSCs). It empowers the IFSCA to regulate these activities, potentially leading to greater standardization, investment, and innovation within the sector. Stakeholders should closely monitor subsequent regulations and guidelines issued by the IFSCA to fully understand the implications of this policy.

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