INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY

NOTIFICATION

Gandhinagar, the 1st July, 2022

International Financial Services Centres Authority (Finance Company) (Amendment) Regulations, 2022

IFSCA/2022-23/GN/REG026.- In exercise of the powers conferred by sub-section (1) of section 28 read with sub­section (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 (Finance Company) Regulations, 2021 (hereinafter referred to as the Principal Regulations), namely:-

1. (1) These regulations may be called the International Financial Services Centres Authority (Finance Company) (Amendment) Regulations, 2022.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Principal Regulations a proviso and an explanation shall be inserted under sub-regulation (1) of regulation 3, namely, –

Provided that a certificate of registration under these regulations shall be required to be obtained by an entity intending to carry out such permissible activities which are not covered under the framework or regulations under which it was previously granted registration or authorisation, if any.”

Explanation: An entity that has obtained a certificate of registration or authorisation for a specific activity under another framework or regulations, issued or notified by the Authority, shall not be required to seek a fresh registration under these regulations for carrying out the same activity, if it is a permissible activity under regulation 5 of these regulations:

3. In the Principal Regulations, sub-regulations (2), (3) and (5) of regulation 3 shall be substituted by the following, namely,-

“(2) A Finance Company can be set up either as a subsidiary or a joint venture, or as a newly incorporated company under the Companies Act, 2013, or in any other form as may be specified by the Authority from time to time,

Provided that if the parent of a Finance Company is carrying out a regulated financial activity in its home jurisdiction, it shall obtain a No-objection Certificate from its home country regulator for setting up a Finance Company in the IFSCs, wherever applicable.”

“(3) A Finance Unit can be set up if the applicant is an incorporated entity in its home jurisdiction.

Provided that a Finance Unit can be set up for undertaking core activities as specified in these regulations only if the applicant, being an incorporated entity in its home jurisdiction, is engaged in the business of financial services and is regulated by a financial sector regulator in its home jurisdiction and has obtained a No-Objection Certificate from the home regulator for setting up a Finance Unit in the IFSCs, wherever applicable.”

Provided further that the conditions under the above proviso shall not apply to an incorporated entity which desires to set up a Global/Regional Corporate Treasury Centre as a Finance Unit in the IFSCs for undertaking treasury activities or treasury services in accordance with the relevant regulatory framework specified by the Authority.

“(5) A Finance Company or a Finance Unit seeking registration shall comply with following conditions:

(i) The applicant seeking registration as a Finance Company‟ shall have and maintain minimum owned fund, depending on the category of activity(ies) or a combination of activities classified under different categories under these regulations, and shall maintain the higher of the minimum capital or owned funds or net worth prescribed for each activity or category of activities specified in Schedule under these regulations or under any of the relevant regulatory framework issued by the Authority, as applicable.

(ii) In case the applicant, being an incorporated entity in its home jurisdiction, is seeking to set up and register a Finance Unit‟, it shall provide and maintain minimum owned fund on unimpaired basis at all times, depending on the category of activity(ies) or a combination of activities classified under different categories under these regulations, and shall maintain the higher of the minimum capital or owned funds or net worth prescribed for each activity or category of activities specified in Schedule under these regulations or under any of the relevant regulatory framework issued by the Authority, as applicable.”

4. In the Principal Regulations, clause (i) of sub-regulation (1) of regulation 5 shall be omitted.

5. In the Principal Regulations, clause (ii) and (iii) of sub-regulation (1) of regulation 5 shall be substituted by the following, namely, –

“(ii) Permitted Core Activities

(a) Lend in the form of loans, commitments and guarantees, credit enhancement, securitisation, financial lease, and sale and purchase of portfolios;

(b) Factoring and forfaiting of receivables;

(c) Undertake investments, including subscribing, acquiring, holding, or transferring securities or such other instruments, as may be permitted by the Authority;

(d) Buy or Sell derivatives;

(f) Global/Regional Corporate Treasury Centres; and

(e) Any other core activity as may be permitted by the Authority.”

“(iii) Permitted Non-core Activities

Subject to specific registration requirements, wherever applicable, permitted non-core activities for a Finance Company or a Finance Unit, as the case may be, shall include following activities:

(a) Merchant Banking;

(b) Authorised person;

(c) Registrar and Share Transfer Agent;

(d) Trusteeship Services;

(e) Investment Advisory Services;

(f) Portfolio Management Services;

(g) Operating lease of any products, including aircraft lease, ship lease or any other equipment as may be specified by the Authority from time to time;

(h) International Trade Financing Services Platform;

(i) Distribution of financial products (including mutual fund units and insurance products);

(j) Function as trading and clearing members or professional clearing member of exchanges and clearing corporations set up in IFSCs;

(k) Asset Management support services permitted under the Framework for Enabling Ancillary Services as specified by the Authority;

(l) Undertaking to act as facilitators of permissible activities as and when permitted by the Authority;

(m) Any other activity without involving a customer interface, as may be permitted with the prior approval of the Authority, that is classified as a non-core activity by the Authority, under these regulations; and

(n) any other activity, as may be permitted and classified as a non-core activity by the Authority, under these regulations.”

6. In the Principal Regulations, sub-regulation (2) of regulation 5 shall be substituted by the following, namely,-

“(2) A Finance Company or a Finance Unit registered for carrying out one or more non-core activities only, may be permitted to undertake investment activities for the purpose of liquidity and balance sheet management as part of its normal business operations and such investment activity shall not be treated as core activity for the purpose of these regulations.”

7. In the Principal Regulations, after sub-regulation 3 of regulation 5 the following sub-regulation shall be inserted, namely, –

“(3A) A Finance Company or a Finance Unit intending to undertake any of the non-core activity (ies) shall be subject to the provisions of the respective framework as specified by the Authority for that particular activity.”

8. In the Principal Regulations, after regulation 10 the following regulation shall be inserted, namely, –

10A. Power to remove difficulties and relax strict enforcement of the regulations

(1) In order to remove any difficulty in the application or interpretations of the provisions of these regulations, the Authority may issue clarifications through guidance notes or circulars.

(2) The Authority, for reasons to be recorded in writing, may in the interest of development of financial market, relax the strict enforcement of any requirement of these regulations, upon payment of fee, if any, as may be specified by the Authority.”

9. In the Principal Regulations, the Schedule shall be substituted by the following, namely, –

SCHEDULE  

[See regulation 3(1), 3(5)(i) and 3(5)(ii)]

No.

Activity Minimum Owned Fund Requirement (in USD or equivalent amount in any other freely convertible currency) Exempted Regulations, if any
1 Undertaking one or more of the non-core activities only

– without any core activity(ies).

(1) Higher of USD 0.2 million or any such amount as may be required to seek specific registration for a proposed non-core activity under the respective Framework/ Regulation for that particular activity; or

(2) Any higher amount as may be specified by the Authority.

Regulation (4) and Regulation (8) subject to the following:

(i) To have a Board approved prudential policy

(ii) Fit and Proper criteria set out by the Authority.

2 Undertaking one or more core activities with or without non-core activities, except for Global/ Regional Corporate Treasury Centres (1) Higher of USD 3 million, minimum regulatory capital for core activities as specified by the Authority; or any such amount as may be required for a non-core activity(ies) under the respective Framework/Regulation for that particular activity; or

(2) Any higher amount as may be specified by the authority.

None
3 Undertaking activities of Global/Regional Corporate Treasury Centres. Higher of USD 0.2 million or any such amount as may be required under the relevant regulatory framework specified by the Authority. Regulation (4) subject to the following:

(i) To have a Board approved prudential policy

(ii) Fit and Proper criteria set out by the Authority.

INJETI SRINIVAS, Chairperson

[ADVT.-III/4/Exty./157/2022-23]

Note:

The International Financial Services Centres Authority (Finance Company) Regulations, 2021 were published in the Gazette of India Extraordinary vide notification No. IFSCA/2020-21/GN/REG010 on 25th March 2021, read with Corrigendum dated 12th April, 2021.

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