'Measures taken to further development of GIFT City'

'Measures taken to further development of GIFT City'

Mumbai: Ajay Tyagi, chairman of Securities and Exchange Board of India (SEBI) during a press conference in Mumbai. (PTI Photo)

Several measures are underway, including the introduction of new products like dollar-rupee derivatives, to further development of 'GIFT City' in Gujarat as a major International Financial Services Centre (IFSC) on the lines of global centres like Singapore and Dubai, capital market regulator Sebi's chairman Ajay Tyagi said on Friday.

The Sebi chief also said the trading turnover of various products on exchanges operating in GIFT City is fast picking up and it would only increase going further.

Addressing a seminar here on 'GIFT IFSC- Onshoring the Offshore, Tyagi said prominent IFSCs set up across the world, including London, New York, Singapore and Dubai, have contributed significantly to the GDP and created large employment opportunities in such jurisdictions.

"India also must figure on the map of the global financial centres network," he said.

The government had announced plans in 2015 to set up India's first IFSC in GIFT City, after which Sebi had issued general guidelines during the same year. Specific guidelines on intermediaries, fundraising, market infrastructure institutions, funds, etc have also been issued subsequently.

Financial sector regulators such as Sebi, RBI, IRDAI and PFRDA have also issued their respective guidelines for IFSC, an overall financial services focused centre involving multiple areas such as banking, insurance, capital markets, among others.

The central government has also announced several tax incentives for operations in GIFT IFSC, while the state government has also provided incentives including stamp duty exemption for entities having registered office in GIFT for capital market activities.

A draft Bill for setting up a separate unified regulator for IFSC is also under consideration in Parliament.

Tyagi said India is a large purchaser of international financial services from the rest of the world and as markets move offshore, India's imports of such such services will only grow.

"Onshoring such international financial services is the key to reduce such imports and rather creating job opportunities and capabilities within India. Such onshoring underlies the very idea of an IFSC such as GIFT City," he said.

Tyagi said creating a financial hub targeting overseas investors needs to have trading hours suited to global investors, and therefore Sebi has permitted the stock exchanges in IFSC to decide the trading hours based on cost-benefit analysis, which may extend up to 23 hours and 30 minutes a day for all products.

The exchanges have accordingly implemented extended trading hours enabling international investors to trade from anywhere across the world through multiple time zones.

The Sebi chief said the average daily turnover on both the exchanges in GIFT IFSC is around USD 3 billion and with new products being launched and the existing products picking up, the turnover is expected to only increase.

The equity index derivatives market has picked up quite well on both the exchanges with a turnover of USD 179 billion in 2018-19, while the first four months of the current fiscal have already seen a turnover of USD 183 billion.

On USD/INR currency products, Tyagi said such products are widely traded in jurisdictions such as Singapore and Dubai. In India, the RBI had set up a task force on Offshore Rupee Markets, which has recently submitted its report.

One of the terms of reference of the task force was to make recommendations to enable Rupee derivatives (settled in foreign currency) to be traded in the IFSC in India, to begin with on exchanges in the IFSC.

"On this term of reference, the Task Force has given positive suggestions for the introduction of such products in IFSC. Subject to the decision of RBI in the matter, I do hope that introduction of this product in IFSC will truly facilitate onshoring of such markets," Tyagi said.

Going ahead, he said, there are several fund management related services such as investment advisers and portfolio management services which can provide a significant boost to onshoring the fund management industry in India.

"A priority area for Sebi is to issue operating guidelines for both these activities," he said.

The Sebi chief said there has been a pickup in the equity derivatives and gold futures trading. "While the exchanges have launched several other products, they are yet to get traction. Going forward, I hope to see other segments and products also flourish in GIFT IFSC."

"On the trading front, the pool of participants currently appears to be limited. I hope to see a broadening of the investor base and wider participation which will enable deepening of the markets in the IFSC," he said.

With respect to eligible foreign investors (EFI), Sebi has received certain representations seeking clarity on some aspects which the regulator is examining and would be clarifying shortly.

On debt listings in the IFSC, Tyagi said many of them have been secondary listings but he feels the market has significant potential for more primary listings also.

"It would also be encouraging to see some traction in the equity segment going forward," he said.