News: To facilitate development of the bullion market in India, generate interest in trading & hedging activities, and serve as a precursor to International Bullion Exchange(IBE), an enabling framework for Banking Units in IFSC to operate Unallocated Accounts has been notified.
The following activities are permitted under the International Financial Services Centres Authority (Banking) Regulations, 2020:
- The BUs are permitted to open Unallocated Accounts for undertaking Trading activities under Clause 13(3) of the regulations. To enable such activities, BUs may permit the opening of accounts by their customers under Clause 11 of the regulations.
- The BUs are permitted to participate in derivative transactions through Unallocated Accounts under Clause 13 (6) of the regulations. All BUs (IBU/FBU) are permitted to open Unallocated Accounts in Gold (XAU) and Silver (XAG) subject to the Risk Management Framework and Disclosures.
An enabling framework for Banking Units in IFSC to operate Unallocated Accounts for the purpose of trading, hedging and swapping with Physical Gold / Silver is being notified with the following objectives:
- To mitigate the risks of the prospective clients of Banking Units who may be looking to buy/ sell or take positions in gold/silver or for the purpose of trading or to hedge their exposures in bullion.
- To aid in financialization of gold as an asset class.
- The aforesaid enabling framework shall encourage Trading, Hedging & Swapping with Physical Gold/Silver.
About International Financial Services Center:
- An IFSC caters to customers outside the jurisdiction of the domestic economy.
- Such centres deal with flows of finance, financial products and services across borders.
- London, New York and Singapore can be counted as global financial centres.
- Services an IFSC can provide:
- Fund-raising services for individuals, corporations and governments.
- Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual funds.
- Wealth management.
- Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms.
- Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching.
- Risk management operations such as insurance and reinsurance.
- Merger and acquisition activities among trans-national corporations.
- The SEZ Act 2005allows setting up an IFSC in an SEZ or as an SEZ after approval from the central government.
- IFSCs in India:
- The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City)in Gandhinagar.