Introduction: The International Financial Services Centres Authority (IFSCA) recently issued Circular F. No. 172/IFSCA/Finance Company Regulations/2023-24/02 on January 05, 2024. This circular addresses the inclusion of ‘Finance Company’ and ‘Finance Unit’ in the category of ‘Credit Institution’ under the Credit Information Companies (Regulation) Act, 2005.
Detailed Analysis: The circular stems from industry stakeholders’ representations, urging the IFSCA to classify ‘Finance Company’ and ‘Finance Unit’ (defined in the International Financial Services Centres Authority (Finance Company) Regulations, 2021) undertaking lending activities in IFSC as ‘credit institutions’ under the CIC Act.
In exercise of powers conferred by the IFSCA Act, the circular specifies that Finance Companies and Finance Units engaged in permissible activities, such as lending, factoring, and more, within IFSC, are recognized as ‘credit institutions.’ This encompasses various lending forms, credit enhancement, financial lease, and activities outlined in the FC Regulations.
The inclusion extends to activities carried out by Finance Companies/Finance Units as Global/Regional Corporate Treasury Centres and those without customer interfaces. The circular aims to provide clarity on the definition and scope of ‘credit institutions’ operating in the IFSC, aligning with the evolving financial landscape.
Conclusion: Issued under the authority’s powers, this circular marks a significant development in the regulatory framework governing financial entities within the IFSC. Finance Companies and Finance Units undertaking specific activities are now officially recognized as ‘credit institutions.’ This move not only enhances regulatory clarity but also reflects the IFSCA’s commitment to adapt regulations to the evolving dynamics of the financial sector.
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International Financial Services Centres Authority
Circular No. F. No. 172/IFSCA/Finance Company Regulations/2023-24/02 Dated: January 05, 2024
To,
Finance Companies/ Finance Units (FC/FUs) in the International Financial Services Centre (IFSC)
Subject: Inclusion of ‘Finance Company’ and ‘Finance Unit’ as ‘Credit Institution’ under clause (f) of section 2 of the Credit Information Companies (Regulation) Act, 2005
The International Financial Services Centres Authority (‘IFSCA’) received representations from industry stakeholders seeking inclusion of ‘Finance Company’ and ‘Finance Unit’, as defined under clause (e) and (f) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021 (hereinafter referred to as ‘FC Regulations’), undertaking lending activities in the International Financial Services Centre (IFSC), as ‘credit institution’ under clause (f) of section 2 of the Credit Information Companies (Regulation) Act, 2005 (hereinafter referred to as ‘CIC Act’).
2. Considering the above, the IFSCA in exercise of the powers conferred by section 13 of the International Financial Services Centres Authority Act, 2019 (hereinafter referred to as ‘IFSCA Act’), read with section 33A and sub-clause (vii) of clause (f) of section 2 of the CIC Act, specifies ‘Finance Company and ‘Finance Unit , undertaking following permissible activities in IFSC, as ‘credit institution’:
(i) lending in he form of loans commitments and guarantees, credit enhancement securitisation financial lease, and sale and purchase of portfolios, as specified in sub-clause (a) of clause (i) of sub-regulation (1) of regulation 5 of the FC Regulations;
(ii) factoring and forfaiting of receivables as specified n sub-clause (b) of clause (ii) of sub-regulation (1) of regulation 5 of the FC Regulations;
(iii) all or any of the activities mentioned in sub-clause (i) and (ii) above, if carried out by a Finance Company/Finance Unit as a Global/Regional Corporate Treasury Centre, and;
(iv) all or any of the activities mentioned in sub-clause (i) and (ii) above, without a customer interface, as specified in sub-clause (m) of clause (ii) of sub regulation (1) of regulation 5 of the FC Regulations.
3. This circular is issued in exercise of the powers under section 12 of the International Financial Services Centres Authority Act, 2019.
4. A copy of this circular is available on the website of the Authority www.ifsca.gov.in/circular
Yours faithfully
(Riddhi Bhandari)
General Manager
riddhi.bhandari@ifscagov.in
