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Date: 28-Feb-2024 Category: Extra Ordinary State: Union Government Country: India

Notification under Sec 31 of IFSCA Act 2019 for modification in provisions of Banking Regulation Act 1949

Issued by Ministry of Finance · Department of Economic Affairs

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Executive Summary & Key Takeaways

What it means

  • The notification, issued by the Ministry of Finance, amends the Banking Regulation Act, 1949, for International Financial Services Centres (IFSCs).
  • It provides exemptions to International Financial Services Centres Banking Units (IFS banking units) of Foreign Banks from certain restrictions related to shareholding limits (Section 19) and restrictions on loans and advances (Section 20) under the Banking Regulation Act, 1949.
  • The notification is issued in exercise of powers conferred by sub-section (1) of section 31 of the International Financial Services Centres Authority Act, 2019.

Key Changes

  • Section 19(2) of the Banking Regulation Act, 1949 is amended to insert sub-section (2A). This sub-section exempts IFS banking units of foreign banks from shareholding limits prescribed in sub-section (2) under certain conditions.
  • The exemption applies when shareholding is held as security in the ordinary course of business or acquired during debt recovery and disposed of within five years. The five-year period can be extended by the International Financial Services Centres Authority (IFSCA) with written justification.
  • Section 20(1) of the Banking Regulation Act, 1949 is amended to include a proviso stating that restrictions mentioned in sub-section (1) shall not apply to loans and advances made by an IFS banking unit of a foreign bank.

Impact Analysis

Impact on Foreign Banks with IFS banking units

  • Action Item: Foreign banks should review their existing policies and procedures to take advantage of these exemptions, ensuring compliance with the conditions specified in the notification.

Impact on Companies in IFSCs

  • Action Item: Companies should explore opportunities to leverage the increased financing options available from foreign banks operating in IFSCs.

Impact on International Financial Services Centres Authority (IFSCA)

  • Action Item: IFSCA should formulate guidelines for extending the five-year period, specifying the criteria and documentation required for such extensions.

Key Entities Referenced

International Financial Services Centres Authority (IFSCA): The regulatory body for International Financial Services Centres in India, established under the International Financial Services Centres Authority Act, 2019. Banking Regulation Act, 1949: The primary legislation governing the regulation of banking companies in India. International Financial Services Centres Authority Act, 2019: The Act that established the IFSCA and provides the legal framework for regulating IFSCs in India. International Financial Services Centres Authority (Banking) Regulations, 2020: Regulations issued by IFSCA governing banking operations within IFSCs. Foreign Bank: As defined in clause (d) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Banking) Regulations, 2020. International Financial Services Centres Banking Unit: A financial institution defined under clause (c) of sub-section (1) of section 3 of the International Financial Services Centres Authority Act, 2019.
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रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99 सी.जी.-डी.एल.-अ.-28022024-252473 xxxGIDHxxx CG-DLxx-xEG-I2D8E0x2x2x0 24-252473 असाधारण EXTRAORDINARY भाग II—खण् ड 3—उप-खण्ड (ii) PART II—Section 3—Sub-section (ii) प्राजधकार स ेप्रकाजित PUBLISHED BY AUTHORITY स.ं 897] नई दिल्ली, बुधिार, फरिरी 28, 2024/फाल्ग नु 9, 1945 No. 897] NEW DELHI, WEDNESDAY, FEBRUARY 28, 2024/PHALGUNA 9, 1945 जित्त मत्रं ालय (आर्थकि काय िजिभाग) अजधसूचना नई दिल्ली, 28 फ़रिरी, 2024 का.आ. 942(अ).—केंद्र सरकार, अतं रािष्ट्रीय जित्तीय सेिा केंद्र प्राजधकरण अजधजनयम, 2019 (2019 का 50) की धारा 31 की उप-धारा (1) द्वारा प्रित्त िजियों का प्रयोग करते हुए, एतिद्व् ारा जनिेि िते ी ह ै दक बैंककंग जिजनयमन अजधजनयम, 1949 (1949 का 10) के कजतपय प्रािधान, िैसा सारणी के कॉलम संख्या (2) में यथाजिजनर्िष्टि ह,ैं दकसी अंतराष्ट्रि ीय जित्तीय सेिा केंद्र में यथाजस्ट्थजत, जित्तीय उत्पािों, जित्तीय सेिाओं या जित्तीय संस्ट्थानों पर उि ताजलका के कॉलम संख्या (3) में जिजनर्िष्टि संिोधनों के साथ लागू होंग,े अथाित्: सारणी बैंककंग जिजनयमन अजधजनयम, 1949 क्र.स.ं धारा सिं ोधन (1) (2) (3) 1. धारा 19 की उप-धारा (2) धारा 19 म,ें उप-धारा (2) के बाि, जनम्नजलजखत उपधारा अंतःस्ट्थाजपत की िाएगी, अथाित्:- 1380 GI/2024 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)] (2क) उपधारा (2) में िर्णित दकसी बात के बाििूि, उसमें उजल्लजखत सीमाएं दकसी जििेिी बैंक के अंतराष्ट्रि ीय जित्तीय सेिा केन्द्द्र बैंककंग एकक पर लाग ूनहीं होंगी- (क) दकसी कंपनी के सामान्द्य व्यापाररक में ििि लेनिने के जलए, िहां िेयरधाररता प्रजतभूजत के माध्यम से धाररत की िाती हो, चाह े िह बंधक, जगरिी या दकसी अन्द्य समान तरीके से हो; अथिा (ख) यदि इसके द्वारा िेय ऋणों की चुकौती के िौरान िेयरधाररता या प्राप्त ब्याि का जनपटान िल्ि-से-िल्ि, परंत ु पांच िर्ि पूरा होने स े पहले दकया िाए। परन्द्त ु खंड (ख) में जिजनर्िष्टि पांच िर्ि की अिजध को अतं रािष्ट्रीय जित्तीय सेिा केन्द्द्र प्राजधकरण द्वारा जलजखत में ििि दकए िाने िाल े कारणों से बढाया िा सकता ह।ै स्ट्पष्टीकरण- इस उप-धारा और धारा 20 की उप-धारा (1) के प्रयोिनाथि, – (i) "अंतरािष्ट्रीय जित्तीय सेिा केंद्र बैंककंग एकक" का अथ ि अतं रािष्ट्रीय जित्तीय सेिा केंद्र प्राजधकरण अजधजनयम, 2019 (2019 का 50) की धारा 3 की उप-धारा (1) के खंड (ग) के अधीन पररभाजर्त जित्तीय संस्ट्थान ह;ै (ii) "जििेिी बैंक" का िही अथ ि होगा िैसादक अतं रािष्ट्रीय जित्तीय सेिा केंद्र प्राजधकरण (बैंककंग) जिजनयमन, 2020 के जनयम 2 के उप-जनयम 1 के खंड (घ) में पररभाजर्त दकया गया ह।ै 2. धारा 20 की उपधारा (1) धारा 20 में, उप-धारा (1) के बाि, जनम्नजलजखत परंतुक अंतःस्ट्थाजपत दकया िाएगा, अथाित:्- "परंत ु उप-धारा (1) में उजल्लजखत प्रजतबंध दकसी जििेिी बैंक की अतं रािष्ट्रीय जित्तीय सेिा केंद्र बैंककंग एकक द्वारा दिए गए ऋणों और अजिमों पर लागू नहीं होगा। [फा. सं. 3/4/2022-ईएम-भाग (5)] सुरजभ िैन, संयुि सजचि MINISTRY OF FINANCE (Department of Economic Affairs) NOTIFICATION New Delhi, the 28th February, 2024 S.O. 942(E).—In exercise of the powers conferred by sub-section (1) of section 31 of the International Financial Services Centres Authority Act, 2019 (50 of 2019), the Central Government hereby directs that certain provisions of the Banking Regulation Act, 1949 (10 of 1949) as specified in column number (2) of the Table, shall apply with such modifications, as specified in column number (3) of the said Table, to the financial products, financial services or financial institutions, as the case may be, in an International Financial Services Centre, namely: TABLE BANKING REGULATION ACT, 1949 Sl.No. Section Modifications (1) (2) (3) 1. Sub-section (2) of section 19 In section 19, after sub-section (2), the following subsection shall be inserted, namely:-[भाग II—खण् ड 3(ii)] भारत का रािपत्र : असाधारण 3 ‘(2A) Notwithstanding anything contained in sub-section (2), the limits mentioned therein shall not apply to an International Financial Services Centres Banking Unit of a Foreign Bank- (a) for a transaction entered in the ordinary course of business in respect of a company where the shareholding is held by way of security, whether as a pledge, mortgage or by any other similar mode; or (b) if the shareholding or interest acquired or held in the course of satisfaction of debts due to it, is disposed of at the earliest but not later than five years: Provided that the period of five years referred to in clause (b) may be extended by the International Financial Services Centres Authority, for reasons to be recorded in writing. Explanation. - For the purposes of this sub-section and sub- section (1) of section 20,- (i) "International Financial Services Centres Banking Unit" means a financial institution defined under clause (c) of sub-section (1) of section 3 of the International Financial Services Centres Authority Act, 2019 (50 of 2019) ; (ii) "Foreign Bank” shall have the same meaning as assigned to it in clause (d) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Banking) Regulations, 2020.’. 2. Sub-section (1) of section 20 In section 20, after sub-section (1), the following proviso shall be inserted, namely:- "Provided that the restrictions mentioned in sub-section (1) shall not apply to loans and advances made by an International Financial Services Centres Banking Unit of a Foreign Bank.”. [F. No. 3/4/2022-EM-Part (5)] SURBHI JAIN, Jt. Secy. 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.

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