Public Comments on Consultation paper on proposed revised ‘Framework for undertaking Global/Regional Corporate Treasury Centres activities by Finance Company/Unit in IFSC

Public Comments on Consultation paper on proposed revised ‘Framework for undertaking Global/Regional Corporate Treasury Centres activities by Finance Company/Unit in IFSC’. Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause A Annex – I 1. 2(1)(f) “Group Entities” means an The current definition of "Group There may be a scenario where arrangement involving two or Entities" includes "investment in multiple entities, including the equity shares of 20 per cent and more entities related to each GRCTC, a holding company, and above" but does not specify other through any of the several subsidiary companies may whether this investment is by following relationships: (i) invest and hold equity shares of the GRCTC, the holding subsidiary – parent (as defined other group entities. Therefore, it is company, or any of the group in Ind-AS 110/Accounting companies. crucial to understand whether the Standard 21); (ii) joint venture 20% investment threshold applies (as defined in Ind-AS Clarify whether the 20% collectively to the group or 28/Accounting Standard 27); threshold should be looked at as individually to each entity (i.e. (iii) associate (as defined in Ind- investment by the holding whether direct or indirect holding AS 28/Accounting Standard 23); company of GRCTC or GRCTC or is also included). (iv) common brand name or (v) would collective investments by This clarification will help align investment in equity shares of group entities be also considered investment strategies and ensure 20 per cent and above; for determining whether an compliance with the framework. entity qualifies as a ‘Group entity’ under the framework. 2. 2(1)(f) Same as above To include ‘related party’ a. The related party relationship relation as defined in the under AS-18 was already accounting standards as part of covered in the existing definition the definition of group entities. of Group entities. Ind AS 24 has replaced AS 18, accordingly theSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause change in the definition should be only to replace the two. b. Definition of Related Party under Ind-AS 24 covers extensively all the group entities. Further definition of related party as given in IndAS24 is inextricably linked to the definition of group entity. Accordingly, it is suggested to include the definition of Related Party as given in IndAS 24 as the definition of Group Entity. c. Proposed definition of “Group Entities” is restricted to only subsidiary / joint venture / associate of the entity. This defeats the purpose of GRCTC to centrally manage funds of all the group entities. d. Inclusion of related party relationship under Ind AS 24 will result in inclusion of following additional entities in the definition of “Group Entities”: i. Step Down Subsidiaries ii. JVs and Associates of Subsidiaries iii. Subsidiaries, JV’s and Associates to JVs of entitySr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause Subsidiaries, JV’s and Associates (on whom entity have significant influence) to Associates of entity. 3. 2(1)(f) Same as above IFSCA be given the authority Accounting standard on the and discretion to grant definition of subsidiary serves the approval to in-scope entities. purpose of financial disclosure and consolidation accounting. In the domain of tax treatment, substance and management control are used. In certain jurisdictions, the beneficial owner Since the purpose of defining an in-scope CTC managed entities, IFSCA should have the discretion to decide if the classification is consistent with the intent of CTC as IHB to manage funds centrally within the MNC. 4. 2(1)(i) Definition IFSCA be given the discretion to GRCTC is an internal service approve if the GRCTC is not a company providing IHB service for wholly owned subsidiary as long the group entities. In certain as the service it provides is for situations, the owner of the GRCTC “Parent” shall mean an entity internally owned entities. may be two subsidiaries of the same (ies) which intends to set up a parent. Therefore, we suggest that GRCTC in IFSC either as its flexibility may be provided to entities wholly owned subsidiary or as to establish using the beneficial owner principle in addition to just its branch; legal owner. 5. 2(1)(h) Definition of Owned Funds There must be "," between Typo error. words "free reserves" & "balance in share premium account" for better clarity.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 6. 3 Eligibility criteria for setting up of Include examples of "splitting Clear examples assist applicants in a GRCTC up" or "reorganization." compliance understanding. 7. 3. 2(i) While evaluating an application The condition that the Success of the GRCTC regime will under sub-clause (1) above, the applicant's operations in IFSC primarily depend on large should not be set up by splitting Authority shall take into account conglomerates who will act as up, reconstructing, or all matters which it deems anchors. reorganising operations already relevant for grant of It is very likely that Indian in existence in India is registration, including: conglomerates will be the anchors. restrictive. (i) that the applicant’s This requirement could However, the stringent conditions operations in IFSC is not significantly hinder the could deter Indian conglomerates proposed to be set up either by establishment of GRCTCs in the from setting up GRCTCs in the IFSC, splitting up or reconstructing or IFSC, as many Indian as they may find it more convenient conglomerates and multinational reorganising of operations and cost-effective to continue their corporations (MNCs) may have already in existence in India operations within their existing existing operations in India that Explanation: For the purpose frameworks in India. This could they would prefer to integrate of determination of splitting up, result in a missed opportunity for the into their global treasury reconstruction and functions. IFSC to attract significant reorganisation of any business The requirement to adhere to international business. already in existence in India, the the conditions in Part A of applicant shall adhere to the Schedule I further complicates requirements specified in Part A this process, making it less of the Schedule I of the attractive for MNCs to consider Framework IFSC as a viable option for their treasury operations Accordingly, the above condition should not be included in the framework.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 8. 3. 2(ii) While evaluating an application The prohibition on transferring This condition, as elaborated in Part under sub-clause (1) above, the or receiving existing contracts or B of Schedule I, could prevent MNCs work arrangements from extant from efficiently consolidating their Authority shall take into account service recipients in India is treasury operations in the IFSC. The all matters which it deems excessively restrictive. inability to transfer existing relevant for grant of Accordingly, the above condition contracts could lead to operational registration, including: should not be included in the inefficiencies and increased costs, i. …… framework. making the IFSC less attractive as a ii. that the applicant’s Alternatively, the IFSCA should hub for global treasury activities. operations shall not lead clarify that transfer of existing to offering the contracts or work arrangements The contracts entered by an MNC permissible activities by to GRCTC wherein one of the with its group entities typically are continuing contracts without way of transferring or parties to the contract/ necessarily having a termination receiving of existing arrangement is a non-resident date. The inability to transfer these contracts or work (for e.g. a loan/ External contracts to the IFSC could result in arrangements from its Commercial Borrowing extended a hindrance for MNCs or Indian extant service recipients by a non-resident to a resident) conglomerates to set up their global in India. is not covered within the ambit treasury operations in IFSC and integrate with their global Explanation: For the purpose of this restriction, as the operations. of this Framework, the language currently included in interpretation of ‘transferring or the draft framework is This would result in having parallel receiving of existing contracts or ambiguous. work arrangements from their operations in India and IFSC which extant service recipients in would lead to duplicated efforts and India’ shall be as per Part B of higher operational costs, Schedule I of the Framework. discouraging MNCs and Indian conglomerates from setting up GRCTCs in the IFSC.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 9. 3. 2(ii) Same as above The prohibition on transferring MNCs often seek to streamline their or receiving existing contracts or operations by consolidating work arrangements from extant contracts and work arrangements. service recipients in India is The inability to transfer existing excessively restrictive. This contracts to the IFSC could result in condition, as explained in Part B duplicated efforts and higher of Schedule I, could prevent operational costs, discouraging MNCs from efficiently MNCs from setting up GRCTCs in the consolidating their treasury IFSC. operations in the IFSC. The inability to transfer existing contracts could lead to operational inefficiencies and increased costs, making the IFSC less attractive as a hub for global treasury activities. 10. 3. 2(ii) Same as above It is suggested that, either the While the provisions of clause 6 of Proviso to clause 10(1)(l) may be the draft Framework, and other omitted or a second Proviso may clauses in the draft Framework such be added in clause 10(1)(l) of as clause 3(2)(x), clause 6(3), the draft Framework stating the clauses 1(a) & 1(b) of Part A, and following- clause 2(a) & 2(b) of Part B of “Provided further that, for the Schedule I, make it clear that removal of doubts, it is clarified services, including BATF services, that a specified Service Recipient can be provided by a GRCTC to both may be either resident or non- resident and non-resident Service resident in India”. Recipients, the reference to Notification No. S.O. 291(E) dated January 18, 2024, might create ambiguity as to whether a GRCTC can provide BATF services to Group Entities which are resident in India.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 11. 3. 2(ix) While evaluating an application The requirement that the MNCs typically operate in multiple under sub-clause (1) above, the applicant or the relevant persons jurisdictions and may face legal of the applicant are not subject proceedings in one or more of these Authority shall take into account to any proceeding for breach of jurisdictions due to the complex all matters which it deems law in any jurisdiction is nature of international business. relevant for grant of restrictive and may inadvertently Disqualifying such entities based on registration, including exclude MNCs who are otherwise ongoing legal proceedings could qualified and capable of limit the pool of eligible applicants contributing positively to the and hinder the growth and (ix) that the applicant or IFSC. development of the GRCTCs in IFSC. the relevant persons Thus, it is necessary to define of the applicant are the specific laws under which, not subject to any where proceedings are on- proceeding for going, the applicant shall be breach of law in any ineligible to obtain a registration jurisdiction; as a GRCTC or alternatively, the condition should be evaluated and relaxed on a case-to-case basis. Accordingly, the IFSCA should retain discretion to determine if the ongoing proceedings justify the denial of registration. 12 3. 2(x) While evaluating an application The requirement that the list of Where a GRCTC in IFSC intends to under sub-clause (1) above, the service recipients must include borrow monies for the overall at least one service recipient liquidity management of the group, Authority shall take into account who is either a person resident from its group entities outside India all matters which it deems outside India or has a branch and/ or financial institutions outsideSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause relevant for grant of office(s) outside India from the India for onward lending to its group registration, including time of set up is restrictive. entities in India, this condition would act as a deterrent although it is Thus, it is suggested that the conducting a permissible treasury said condition should not be activity. (x) the list of service This condition could limit the ability applicable. recipients to be of MNCs who have current visibility catered to by an on only Indian service recipients to entity seeking set up GRCTCs in IFSC. registration as a GRCTC shall include This requirement could reduce the at least one service flexibility of MNCs to set up their recipient which is treasury operations in IFSC. either a person resident outside India or has a branch office(s) outside India; 13. 4(1) i Application for Transparency in costs prevents DIFC regulatory framework Registration confusion during application. mandates transparency in financial obligations, including fees for ii The applicant shall Treasury Centres. submit an application to the Authority, for grant of Certificate of Registration, in the format and in the manner as may be specified by the Authority.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 14 4 (4) The applicant, at the time of The draft framework requires Since GRCTCs typically deal with application, shall provide a list of that the applicant, should at the only group entities, they should be time of application, provide a list the group entities it intends to permitted to render the permissible of the group entities it intends to serve including information services/ activities to group entities serve including information about: without specific notification to the about, inter alia, the activities a) the nature of the relationship IFSCA. Separately, where this proposed to be undertaken by between the applicant and each the GRCTC for or on behalf of information is required, the IFSCA entity, or the relationship each entity. could call for the said information or between the parent of the require the GRCTC to furnish these applicant and each entity; It is pertinent to note that details in the form of annual GRCTCs are entities that deal b) the jurisdiction in which each reporting. with their group entities. entity is incorporated and Accordingly, the framework in operates; this regard should be more c) the activities that each entity principle based rather than being is undertaking in that prescriptive. jurisdiction; d) the activities proposed to be Thus, the requirement that the undertaken by GRCTC for or on information about the list of behalf of each entity. group entities intended to be serviced and the activities proposed to be undertaken by the GRCTC on behalf of each of the entity being informed by the GRCTC at the time of registration is unrealistic. Moreover, new group entities may be established at a laterSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause stage or the existing group entities may require services at a later stage which were not initially needed at the time of application. Thus, it should be permitted for the GRCTC to render permissible services/ activities to the entities falling within the definition of ‘Group entity’ without prior approval of/ intimation to the IFSCA. 15 5(1) The applicant shall be required Entity be permitted to set up in • Groups have certain policies of to be incorporated in IFSC, in LLP form as well. operating under an LLP structure, and hence to align the form of a company or a with such policies it is proposed branch or in any other legal form that an LLP structure be allowed. as may be specified by the • LLPs could be allowed with Authority from time to time. appropriate safeguards for governance norms, such as directing the LLP not to borrow external funds and use only group funds etc. Further, LLPs also enjoy separate legal identity similar to companies and hence LLPs should also be treated at par and be allowed. 16 6(1) GRCTC shall perform Treasury • The draft consultation paper By providing definitions of Treasury Activities for and/or provide does not provide what Activities and/or Treasury Services, Treasury Services to either its constitutes as Treasury there will be clarity on what isSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause Group Entities and/or to the Activities and/or Treasury permissible to be undertaken by Group Entities of its parent Services. GRCTCs in and from GIFT IFSC. and/or to the branch of such • It is suggested to define both Group Entities. the terms to avoid interpretation issues. • Such definition can be an inclusive (and not exclusive) definition also giving room to include what may additionally be done as treasury activity/ services, in line with changing times. 17 6(2) The entities mentioned in sub- Stipulating service recipients Proactive risk management supports clause (1) above, designated as must not be from "High-Risk" regulatory compliance. Ireland's financial services law service recipients, shall be jurisdictions is crucial for requires immediate notification of domiciled in a jurisdiction not compliance. changes in jurisdictional risk to identified in the public Specify measures if a jurisdiction protect compliance. statement of Financial Action changes status post-registration. Task Force as ‘High-Risk Jurisdictions subject to a Call for Action’. 18 6 (3) GRCTC may cater to such The clause is suggested to be Pooling of cash accounts from a service recipients who are amended referring to foreign Foreign Exchange Management Act, 1999 perspective is not yet persons resident in India exchange norms for pooling of permitted for Indian entities which provided that any transactions cash account for Indian service propose to set up a GRCTC in GIFT with such service recipients shall recipients. IFSC. It is requested that IFSCA be undertaken in compliance enables the same for Indian entitiesSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause with the provisions of the as it will help provide a level playing Foreign Exchange Management field vis-à-vis their foreign counterparts. Act, 1999 19 6(3) Same as above A GRCTC may cater to such Clear guidance helps prevent service recipients who are regulatory breaches and enhances operational efficiency. persons resident in India provided that any transactions with such service recipients shall be undertaken in compliance with the provisions of the Foreign Exchange Management Act, 1999. 20 7(1) A GRCTC shall have and Consider a tiered capital The capital requirement of USD 0.2 maintain owned fund of USD 0.2 requirement based on size or million is pragmatic but may challenge smaller entities. million at all times. Provided that operations. in case a GRCTC is set up in the Allows flexibility for smaller form of a branch, it shall companies, fostering growth in maintain the owned fund at the IFSC. parent level. Ireland has adopted tiered capital requirements for different-sized financial institutions to encourage small and medium enterprises. 21 8(1) Issuance of provisional In respect to issuance of The clarity of the timing and scope registration provisional registration, we will help the applicant to plan for the transition and final resources (1) After considering an suggest to indicate the range to requirement and the migration plan application for registration, if time a) the provisional (to lift and drop, communicationSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause the Authority is satisfied that the registration will be granted after plan to suppliers/customers, said application, prima facie, receipt of the completed banking arrangement, legal documentation between CTC and satisfies the conditions for application and b) for the affiliates). granting registration, the conversion from provisional to Authority may issue a final registration. Also suggest to provisional registration to the indicate the scope of activities Applicant and shall require the that provisional registration is Applicant to satisfy such allowed and not allowed. conditions and within such time as may be specified by the Authority in the provisional registration before grant of registration. 22 9(3) Grant of Registration: We suggest to give list or In listing rules for example, indicative list of the “material change in directors, capital change in the information or (3) The GRCTC shall, at any time structure, ownership is considered particulars” which are required after the grant of registration material change. Recently SEBI in to be intimated can be provided intimate to the Authority of any in the guidelines. its FPI guidelines has prescribed material change in the indicative list of material change information or particulars We also suggest to clarify which FPIs are required to inform previously furnished. whether adding or removing SEBI. companies receiving service This would enable entities to from GRCTC is “business as internally put processes and usual” activities (not material governance control to adhere to change) as long as the IFSCA circular. companies are within the definition set by the rules.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 23. 10. Permissible Section 10(1) of the entity, an In corporation, the use of activities/services entity registered as a GRCTC derivative is highly controlled usually shall can provide activities as part of Treasury Policy that and/or services to its service defines a) the purpose (for hedging, recipients as mentioned in Section 10(1) of the framework. proprietary trading or both), b) the We request following clarification approved counter-parties, limits, on the services: currencies and structures (only a. Borrowing buy option not sell option). For GRCTC as an IHB, it may need to We understand that there are book a derivative transaction with no restriction on tenor and a related co to hedge on behalf of cost of such borrowings. that entity. GRCTC can borrow from non- residents & residents. Borrowing from resident will This is to ensure that GRCTC does be subject to FEMA norms. not need to unwind pre-existing contracts which may not be b. Credit arrangement permitted in new rules as it may We understand that credit incur unexpected gain or loss and arrangement can be entered the underlying long or short with resident and non- position protection purpose cannot residents. We request be maintained. guidance may be provided on end-use monitoring of these credit arrangements. c. Transacting or investing in securitiesSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause Whether GRCTC can invest in notes linked to FX / Rates / Commodities / Credit, which are non-principal protected. Whether investment in unlisted instruments can be done. d. Buy and sell of derivatives as a client we suggest to clarify: 1. whether GRCTC can be a counterparty to a related group entity on a derivative transaction and they can decide to have a back to back derivative transaction with a Bank. 2. Can GRCTCs enter into derivatives (rates, Fx, precious metals and other asset classes) to hedge the risk on their service recipients' books orSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause for the purpose of risk transformation? 3. Further it may be clarified if CCIL reporting is applicable for derivative transaction done by GRCTC. 4. GRCTCs cannot enter into proprietary trading. • As per section 10(2) of the guideline, the activities/services at clause (1) above, shall be undertaken in compliance with such directions/guidelines as may be issued by the Authority from time to time. We suggest to clarify that new guidelines will not affect transactions booked prior to the new guidelines and earlier transaction remaining outstanding are valid. 24 10(1) Permissible activities The draft framework provides for It is pertinent to note that GRCTCs a list of permissible activities/ primarily undertake activities with/ services which GRCTCs in IFSC render services to group entities. can undertake. Thus, GRCTCs in IFSC shouldSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause typically be subject to a lower level While the permissible activities/ of regulatory restrictions for making services are broad, there could it attractive for MNCs to undertake be activities/ services which may their global treasury operations from not fall within the prescribed list IFSC. IFSCA could require GRCTCs for e.g. advisory on internal in IFSC to provide annual reporting treasury policies, engaging as an so as to monitor the activities in-house center providing virtual undertaken by the GRCTC in IFSC. accounts to group entities to undertake settlements without physical remittance of funds etc. These activities/ services are permitted in the extant framework. However, in the absence of these activities/ services being explicitly included in the draft framework, it creates ambiguity on the permissibility of such activities/ services. IFSCA should instead prescribe a negative list of activities/ services which GRCTC cannot undertake so as to keep the contours of permissible treasury activities/ services from IFSC broad. While the Annexure II provides the guidelines on what is included as ‘permissibleSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause activities/ services’ we observe that the definition of ‘securities’ is an inclusive definition and also includes other financial instruments. It may be pertinent to also include a broader definition of ‘other financial instruments’. Separately, where activities/ services are specifically not covered under the framework, based on evaluation of the IFSCA, where the same qualify as treasury activities/ services, these should be permitted on a case-by-case basis either at the time of application and/ or at a later stage as necessary. 25 10 (1)(d) An entity registered as a GRCTC It would be helpful to elaborate The volume of derivative contracts shall provide such activities on the scope of activities traded by the GRCTC could be covered under ‘Buy and sell of substantial as these contracts are and/or services to its service derivatives as a client’. entered by GRCTC to manage the recipients as specified below: Please clarify that this risk of the overall group. Further, Buy and sell of derivatives as a permission includes speculative the GRCTC may also trade in over client; trading and is not restricted to the counter derivative contracts. As hedging. the said contracts are executed to hedge the overall risk of group, they may not necessarily be linked to underlying securities/ currency or interest rate risk on another balanceSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause sheet on one-on-one basis. It may be difficult for the GRCTC to produce documentation to substantiate that risks on different balance sheets are being hedged by GRCTC in GIFT IFSC. Under the current provisions of the Indian Income-tax Act, 1961, the derivative contracts traded on recognized stock exchange in India are excluded from the scope of speculative transaction. However, the tax definition of speculative is from a different perspective as compared to the perceived objective of the IFSCA in this case. To clarify, from the perspective of Income-tax Act, 1961 – there is only a definition of ‘speculative’ transaction as against a prohibition. 26 10(1)(g) Re-invoicing Expansion of scope with controls. We suggest that GRCTC may be As per guidelines, Re-invoicing permitted for merchant trading activities shall include the without involving group following: companies (i.e buyer or seller) (a) facilitating the aggregation i.e. expanding the scope of re- and netting of liquidity flows andSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause financial risk on behalf of its invoicing to trade invoicing service recipients. involving only 3rd parties. (b) Financing the purchase and sale of goods on behalf of the Additional control can be service recipients of the treasury prescribed on percentage of centre, provided that the GRCTC total transaction does not take possession of value/reinvoicing turnover of goods purchased. third parties etc. 27 10(1)(l) Pertaining to activity of BATF – The clarification relating to We understand that the existing enabled as below; 'Indian residents' as eligible GRCTC framework is being revised 'Service Recipients' to whom to streamline permissible activities GRCTC may cater, subject to and services, aligning them with Account-keeping, Accounting, compliance with FEMA international practices to make the Taxation and Financial Crime regulations, is a welcome GRCTC proposition more attractive Compliance Services (BATF change. for multinational corporations services); Furthermore, an entity (MNCs) to establish their treasury registered as a GRCTC is now centres in the International Financial Provided that apart from permitted as per the draft Services Centre (IFSC). conditions applicable to framework to offer Book permissible activities by GRCTCs Keeping, Accounting, Taxation, While the scope in the draft such BATF services shall be and Financial Crime Compliance regulation has been expanded to provided in adherence to the Services (referred to as 'BATF') include BATF services, restricting provisions contained in to Service Recipients. However, these services to only non-resident Notification No. S.O. 291(E) these BATF services must recipients may be stifling for MNC dated January 18, 2024, issued adhere to the provisions outlined groups that intend to set up a by the Ministry of Finance and in Notification No. S.O. 291(E) treasury centre in the IFSC and have published in the Gazette of dated January 18, 2024, issued a global presence, including in India. India. by the Ministry of Finance In such a scenario, the MNC group [‘Notification 291 (E)]. As per may be compelled to establish twoSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause Notification No. S.O. 291(E) parallel entities—one catering to dated January 18, 2024, the global operations and another for BATF services can only be the Indian group—resulting in a provided to non-residents. cost-ineffective proposition. In any case, non-BATF services can Considering the above and the be provided under the proposed rationale provided, it is GRCTC Framework to Indian recommended that appropriate resident group entities. amendments be made to the draft framework to allow BATF services to be provided to non- residents as well as Indian resident group entities. Please clarify whether an entity which intends to undertake treasury activities/ services can commence its operations by rendering only BATF services (to either residents or non- residents) at the initial phase which may be followed by other treasury activities/ services. 28 10(1)(l) Same as above The conditions under the BATF Global Treasury Centres operate on (Book keeping, Accounting, a different scale and scope Taxation, and Financial Crime compared to typical bookkeeping Compliance) regulations should and accounting services who not be applied to global support external customers.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause operations like Global Treasury 1) GTCs restrict the activities to Centres(GTCs). The inclusion of Group BATF services under the Companies permissible activities for 2) Benefits of scale are achieved by GRCTCs, as specified in consolidating these BATF services Notification No. S.O.291(E) from several geographical markets. dated January 18,2024, issued Applying BATF regulations to GTCs by the Ministry of Finance, for performing book-keeping, imposes additional regulatory accounting and taxation services burdens that are not aligned with within Group Companies could the global nature of GTC impose compliance burdens and operations. operational constraints, making the IFSC less attractive for setting up such centres. 29 10(1)(l) Same as above There is an ambiguity as to This would remove ambiguity on whether a GRCTC can provide whether a GRCTC can provide BATF BATF services to Group Entities Services to the Service Recipients which are resident in India. who are resident in India. It is, therefore, suggested that, either the Proviso to clause 10(1)(l) may be omitted or a second Proviso may be added in clause 10(1)(l) of the draft Framework stating the following- “Provided further that, for the removal of doubts, it is clarified that a specified Service Recipient may be either resident or non- resident in India”. 30 Clause 11 The GRCTC shall commence its The GRCTC shall commence its It often takes time for the necessary operations within six months operations within twelve physical infrastructure to be completed and be in usable form.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause from the date of issuance of months from the date of Accordingly, it is requested to allow Certificate of Registration issuance of Certificate of GRCTC to commence its operations within 12 months from date of Registration. issuance of Certificate of Registration instead of 6 months. 31 Clause 11 Same as above The six-month timeframe to Flexibility can accommodate commence operations may be unforeseen challenges without penalizing compliance. tight for certain entities. Consider allowing for a one-time extension for reasonable delays. 32 Clause 12 Corporate Governance Part II Detailed Guidelines of F. GRCTC handles in-house Treasury (1) Every GRCTC shall have a No 172/IFSCA/Finance Company business, restricting their treasury services within Group Companies. Board approved corporate Regulations/2021-22/9 August GRCTCs follow the governance governance policy. 09,2021 Corporate Governance requirements applicable to the (2) The policy shall Policy should be made optional nature of their legal incorporation comprehensively and clearly by GRCTCs. structure under The Companies document its governance Act,2013. As such, you may dispense with the requirement to arrangements i.e., the have additional guidelines, which framework under which its may lead to hardship incompliance Board and senior management cum reporting requirements, for shall function. handling the in-house business. 33 Clause 12 Same as above Corporate governance policies Regular audits enhance are essential. Including a accountability and compliance requirement for regular audits to assurance. ensure adherence to governance and risk management policies.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 34 Clause 12 Same as above We suggest to GRCTC should The scope of GRCTC activities, also have Treasury Policy, purpose, objectives, performance addition to governance policy KPIs will determine how the and risk management policy. governance process and risk management process should align. 35 Clause 12(3) The GRCTC shall develop a risk We suggest that it may be added The risk mitigation measures management policy. that policy to cover key risks should be comprehensive starting This policy shall include the associated with the management with the identification the types of procedures and systems that of GRCTC including a) risk and quantifying/measuring enable it to identify, measure, monitor and manage the range operational risks, b) market risks the probability and impact of such of risks that arise in or are borne (currency risk, interest rate risk, risks (some are high probability by it while providing permissible price risk), c) duration mismatch but low impact, some are low activities/services. risk, d) liquidity risk, e) counter- probability but high impact like party credit risk, f) cyber- cyberattack) security risk, g) regulatory and The monitoring and response compliance risk (such as should be part of Treasury sanction violation), h) other risks Standard Operating Procedure (like concentration risk). (TSOP) with exception reported to the board to close the loop of operational control, management control and board control. 36 13(1) As per 13 (1), Fit and Proper In reference to above Given the GRCTC set up is new and requirements, The GRCTC shall requirement, we suggest to the scope of its remit includes ensure that its Relevant include Continuing Professional international treasury Person(s) satisfy the ‘Fit and Development (CPD) management which is more Proper requirements’ (FPR) requirement. dynamic than domestic activities. IFSCA can embed best practice inSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause specified in Schedule II of the such courses (remote or face to Framework. face) to maintain CTC personnel a high level of competency level. In Hong Kong, HKMA maintains a minimum 20 CPD hours per calendar year requirement for professional level member of Treasury Markets Association. 37 Clause 14(2) As per Clause no 14(2) The We suggest clarifying whether Given the strategic importance of GRCTC may carry out GRCTC can conduct PINO (Pay in IFSC as the treasury centre hub for transactions in currencies other the Name of) and RIBO (Receive India, companies (India and than in those specified in clause in the Name Of) for entities in foreign) can consider (1) above, so long as such India outside IFSC subject to transactions are settled outside adherence to FEMA guidelines. consolidating the domestic IFSC. Further, the activities payment control also in IFSC to permitted under Liquidity achieve the synergy benefit. This management, management of will position IFSC as an integral obligations on behalf of service part of the whole India strategy for recipients towards insurance new FDI from MNC as well as a and pension related commitment etc. new centre of excellence to build the expertise and talent pool for treasury in IFSC. 38 Clause 15 Applicable fees for GRCTC The fee structure is clear; Transparency regarding fees fosters however, consider providing a trust and helps in budgeting for rationale for the set fees, applicants. especially the recurring fee, to justify costs to stakeholders. The DIFC and Singapore frameworks include clear justifications for all fees, promotingSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause transparency for financial institutions. 39 Clause 15 Same as above Clause 15(1) specifies that the This would remove ambiguity on Recurring Fee payable by a whether a GRCTC which has already GRCTC would be USD 25,000. At paid the Recurring Fee for financial present the recurring fee year 2024-25 needs to make payable by a GRCTC is USD payment of any additional Recurring 12,500 which is payable at the Fee for FY 2024-25 once the draft start of each financial year. As Framework becomes applicable. the draft Framework may become applicable some time in the current financial year 2024- 25 and the GRCTC’s would have already paid the existing recurring fees of USD 12,500, it is suggested that a specific Proviso may be inserted in this clause to provide that an existing GRCTC would be required to pay the recurring fee of USD 25,000 from the financial year commencing after the draft Framework becomes applicable. It is further suggested that the word per annum may be added after the amount of USD 25,000 appearing against Recurring Fee in clause 15(1). 40 Clause 15 Same as above The fee structure outlined in the High fees may act as a barrier to draft framework is excessively entry for many MNCs, particularly high. The registration fee of USD those that are cost-sensitive. 25,000 and recurring fee of Reducing the fees could make theSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause USD25,000 are substantial. As IFSC more attractive to a broader per the original framework, it is range of potential applicants, USD12,500 for registration and thereby increasing the likelihood of recurring fee each. Increasing successful GRCTC establishments. the fee would deter potential applicants from setting up in IFSC. 41 16 (1) Repeal and Savings: The repeal of previous circulars Smooth transition supports ongoing From the date of issuance of this is noted. Ensure that a clear compliance and operational Framework, the IFSCA Circular transition plan is in place for continuity. titled ‘Framework for entities operating under the old undertaking Global/Regional framework to adjust to the new Corporate Treasury Centres one. activities by Finance Company/Finance Unit in IFSC’ issued by the Authority on June 25, 2021, shall cease to apply. 42 Schedule 1 Workforce Requirement: The We request that it may be While the treasury transactions will Part A number of employees clarified on minimum be booked in IFSC, the increased transferred/ relocated from any headcount required for GRCTC adoption of technology (like TMS, 1(a) of its service recipients in India in IFSC such as Head of the robotics, AI and straight through as at the end of the financial entity, Compliance, Risk dealer processing) will minimise the year do not exceed 20% of the etc. headcount. total employees employed with the service recipients of the GRCTC 43 Part A Asset Requirement: There We suggest to clarify that while The scope of work of GRCTC is part 1(b) should not be any transfer of asset transfer is not permitted, and parcel of the Group financial assets from any of the service GRCTC can lease the asset (e.g. management from external recipients in India to the BATF IT infra, systems etc.) from borrowing to internal intra-group Service Provider. Group company for the right to lending. The ERP, TMS and use the asset. internal IT cost will be sharedSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause either on a lease (based on cost allocation) to avoid CTC duplicated cost structure. 44 General NA Provision on time period for Time period for grant of approval suggestions grant of approval upon will provide transparency of timelines that an applicant entity can submission of complete expect and promote ease of doing application should be added. business. 45 General NA Provision for variation or Variation or cancellation/ surrender suggestions cancellation/ surrender of of registration with prior consent of the Authority would provide a registration for the permitted comfort for the entities to open their activities/services as a Global/ Global/ Regional Corporate Treasury Regional Corporate Treasury Centres in first place. As easy Centres. withdrawal or closure of business also promotes ease of doing business. 46 General NA Application form for obtaining For understanding the expectation suggestions approval for undertaking Global/ of the Authority on details and documents required, the relevant Regional Corporate Treasury form for obtaining approval for Centres activities should be undertaking Global/ Regional included. Corporate Treasury Centres activities should be included in the Revised Framework. 47 General We suggest the scope of First, it is more efficient to have one suggestions GRCTC to include both onshore global pool per currency. (India) and offshore Second, the FX buy/sell cost can be (international) entities if the reduced. For example, the USD transactions involve foreign collected by one export entity can be currencies. used to pay for an import entity.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause Third, the hedging cost can be reduced. For example, the long USD position can offset the short USD position. The hedging requirement is reduced from gross to net. B Annex – II 48 10(1)(a) Activity Type: Borrowing Specify limitations on borrowing Clarity on borrowing limits ensures to prevent over-leverage. (e.g., financial prudence and risk borrowing not exceeding a management. certain percentage of owned funds). Ireland does enforce borrowing limits on corporate entities to ensure financial stability and prevent systemic risks. 49 10(1)(b) Activity Type: Credit Add examples of acceptable Examples provide clearer Arrangement credit facilities to guide expectations for compliance. applicants. (e.g., revolving credit lines, standby letters of credit, and performance guarantees). 50 10(1)(b) Same as above Lending in INR be allowed to Considering that GRCTCs will also Indian group entities. cater to Indian group entities, it should be permitted to lend in Rupee External commercial borrowings (ECBs) as this may be cost effective for Indian entities using the borrowings for INR dealings. Banks in GIFT IFSC are also allowed to offer such Rupee ECBs, considering treasury lending operations are similar to bank lending but toSr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause groups, a similar product also be allowed to GRCTCs. Further, appropriate relaxations should be introduced under the ECB guideline to ensure that GRCTCs can also manage the treasury activities of group entities including India. 51 10(1)(c) Activity Type: Transacting or Transacting or investing in Corporate treasury entities are investing in securities securities be broadened to responsible for managing the include exchange traded funds liquidity, investments, and financial and mutual funds. risk of a corporation. In fulfilling these duties, treasurers ensure that funds are strategically managed and available when required by the group, hence liquid assets are common investments in the portfolio of corporate treasuries. In this connection Exchange-Traded Funds (ETFs), along with other liquid assets including mutual funds should be allowed as investment for GRCTCs. 52 10(1)(d) Activity Type: Buy and sell of Clarify what constitutes a Clear definitions promote derivatives as a client "professional client" to ensure understanding and compliance understanding. among stakeholders. 53 10(1)(h) Activity Type: Liquidity Clarify how surplus funds should Helps maintain regulatory Management be invested according to compliance while optimizing regulatory guidelines. financial operations.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 54 10(1)(i) Activity Type: Maintaining Include guidelines on the Regular assessments ensure relationships with financial frequency and depth of proactive risk management and counterparties performance and risk analytics. transparency. (e.g., quarterly performance reviews and annual risk assessments). 55 10(1)(j) Activity Type: Management of Provide clearer guidelines on Ensures effective management of obligations on behalf of service obligations management obligations and compliance with recipients towards insurance regarding pension and relevant laws. and pension related insurance. commitment. 56 10(1)(m) Activity Type: Acting as a Outline the responsibilities of Clear guidelines help in holding company GRCTCs acting as holding understanding the scope and companies. limitations of activities. Singapore provides detailed obligations for holding companies in its Treasury Centres framework. 57 General NA GRCTC can accept deposits from GRCTC is a centre for managing the suggestion service recipients. funds of all group entities. Surplus funds of group entities must be allowed to be parked as deposits with GRCTC. 58 General NA Raising of Equity and any other This clause is already present in suggestion form of capital. existing framework under clause 1(F)(xi). GRCTC must be allowed to raise equity from the market.Sr. Clause no. Text of the clause / sub- Comments/ Suggestions Rationale No. clause 59 General NA New treasury activity to be GTC should be permitted to perform suggestion permitted – Market Risk Taking Market Risk taking positions to Positions. augment other Treasury Services IFSCA Response: The above comments/ suggestions received within the prescribed timeline were considered and placed before the Competent Authority. Necessary modifications / changes have been carried out on the ‘Framework’.