International Financial Services Centers Authority Act 2019

Author: Anshi Mishra, 3rd Year, B.A.LL.B (Hons.), School Of Law, Jagran Lakecity University, Bhopal. The article has been written by the author while pursuing the internship programme with us. Introduction: International financial services center authority has been established by the Government of India called International financial services center authority act 2019. The bill was introduced by Finance Minister Nirmala Sitharaman in Lok Sabha. This act seeks to establish a unified authority to regulate all the functions of the international financial service centers which are setup under the Special Economic Zone Act 2005. While introducing the bill the Finance Minister said the authority will act as a single window to regulate all the financial functions of the IFSC. International Financial Service Center International Financial Service center caters the customers who are outside the jurisdiction of the domestic economy which are related to the financial product and the cross border services. The main objective of IFSCs is to promote the ease of doing business. On an international level there are many emerging IFSCs which include New York, London and Singapore as the prominent ones. There are numerous services that IFSCs provide such as fund raising services for individuals, various other corporations and government as well. The task of assets management and wealth management is being done by IFSCs. These centers handle the mergers and the acquisitions activities within the transnational corporation. It deals with the Global/ Regional treasury Management Operations under this operation various activities are included like fundraising and risk management by the help of insurance, liquidity investment and management.[1] The first International Financial Service Center was set up in India by the Gujarat International Finance Tec-City in accordance with the SEZ Act 2005. An IFSC setup in India was done with the objective of bringing all the financial services and transactions that are happening outside the territory of India. Need and Objective of the Bill Earlier the banking, insurance sector in the IFSCs were regulated by the various regulating authorities like SEBI, RBI and IRDAI but keeping in consideration the dynamic nature of the work that IFSCs does, there was an alarming need for an inter regulatory coordination. All the financial services and the product in the IFSC requires the development which can be achieved by a unified financial regulatory which is solely dedicated and focused to provide an enormous world class environment for the participants to work in the financial market. As stated earlier the main objective of the act is to promote the ease of doing business on an international platform. Applicability- The act is applicable to the International Financial Service Center which came into existence through Section 18 of the Special Economic Zone Act 2005. Key Highlights of the Act Composition- The composition of the authority will consist of the members which will be appointed by the Central Government. The members include a Chairperson, one member each who is to be nominated by the SEBI, RBI, IRDAI and PFRDA. Two members will be nominated by the central government who are working as officials in the Ministry of Finance. Two members will also be recommended by the selection committee and will be appointed by the Central Government. This selection committee will be constituted by the central government as the manner as may be prescribed. Further the Chairperson is deemed to be the whole time member and the other member can be whole time or part time member of the authority[2]. The Chairperson and the members will hold the office for the term of 3 years. Functions- According to the provisions laid down in the International Financial Service Center Authority Act it is the duty of the authority to regulate and develop the financial services financial product and financial institution in the International financial service center. The act provides the regulation of the financial services and products which were previously approved by the SEBI and RBI. It will follow all processes which are applicable to such financial products, financial services, and financial institutions under their respective laws. The appropriate regulators are listed in a Schedule to the Bill, and includes the RBI, SEBI, IRDAI, and PFRDA. The central government can further amend this schedule by issuing notification . Other functions of the Authority includes the regulating of any other financial products, financial services, or financial institutions in an IFSC, which may be notified by the central government, and recommending any other financial products, financial services, or financial institutions to the central government, which may be permitted in an IFSC.[3] International Financial Services Authority Funds- The Act establishes the International Financial Services Authority Fund. All the grants, fees and the charges received by the authority through this act will be credited to the fund. Further all the sums which are received by the authority from the recognized sources by the central government will be credited to the fund. The fund will be used for the purpose of giving salaries and the allowances to the members and the employees of the authority. The fund will also be used for other expenses which are incurred by the authority in order to function according to the Act.[4] Performance Review Committee-The functioning of the authority will be reviewed by the Performance Review Committee which will be formed by at least two members of the authority. The task of the committee is to keep a check on the authority whether it adheres to all the provisions of the law applicable while performing the functions and exercising the power granted through the act also to keep a check on the authority whether it is working in a manner to manage the risk. All these reviews should be done by the committee at least once in the financial year and should submit its findings in the report to the authority which will be forwarded to the central government. [5] Controversy Related to the Act The controversy is related to the place of establishment of the headquarters of the authority. The notification was passed by the central government stating that the headquarters of the authority will be in Gandhinager, Gujrat where GIFT city is already located. And not in Mumbai which is the country’s Financial Hub. The present Maharashtra Government placed the blame on Devendra Fadnavis Government at the time of the project, stating that the Fadnavis Government tried canceling the headquarters project by giving a plot which was meant for IFSC Authority to bullet train terminus. However, the Fadnavis Government clarified that the bullet train terminus was to be built underground and the IFSC Authority headquarters above the ground. Fadnavis further claimed that the headquarters project was put on the backburner as the newly formed state government (Maha Vikas Aghadi) did nothing to get it in Mumbai.[6] Further in this regard Mr. Sharad Pawar wrote a letter to the Prime Minister stating all the reasons to reconsider the decision of setting up a Headquarter in Mumbai. The Act is a two sided sword it has its own pros and cons which are: Pros The objective of the act is to develop and regulate the Financial Services market in the International Financial service centers in India and all the matters connected to it and incidental will be taken into consideration under the said Act. In the present scenario the technology is superseding all the institutions and this act aims at setting up an authority to provide a uniform regulation to the financial services. The act also focuses on the check and balance of its own functions through the Performance review committee so that no discrepancies arise while functioning and the authority becomes answerable for its performance. The Act has clearly taken care of the funds allocations that will be used while executing the functions of the authority. Altogether this act is developed keeping in mind the future aspect of India and it is a step forward to increase the efficiency in the Financial Service Market. Cons The act provides an establishment of integrated financial regulator for International financial services centers and right now in India there is only one IFSC which is GIFT (Gujrat International Finance Tec-City), so the act will now function on only one IFSC i.e. one authority for one entity. The composition of authority is of 9 members out of which 6 are part time, with the current state of Indian economy the act would have been more concrete on this point as the legislation is being drafted for the future years development and not just for the temporary basis. Another loophole of the act is that it lacks the dispute resolution mechanism of the authority, the act should have addressed the modus operandi in the case of any dispute in the authority. Conclusion The International Financial Services Center Authority Act was passed by the parliament to manage the functions of IFSC by a unified regulating authority. The main aim of this act is to promote the ease of doing business in the country. All the financial services, financial products and financial institutions will be regulated through this act. IFSC performs various tasks from fund raising for corporations to risk management and thus there was an alarming need for a unified regulating authority to make sure that IFSC functions in an efficient manner. The act provides the composition of the authority which includes the Chairperson and the members nominated by the SEBI, RBI and IRDAI and appointed by the central government. The act establishes a Fund in which all the fees and charges are credited, this fund is also used for giving salaries and incurring all the expense to carry out the functions given in the act. Also a reviewing committee is established through the act which keeps a check on the functioning of the authority. The headquarter of the authority is being set up by the central government in Gandhinagar Gujarat through a notification, on which the Maharashtra Government was not satisfied because Mumbai was supposed to be the Headquarter of the authority. REFERENCES: [1] Asit Ranjan Mishra, What is an IFSC and how does it work?, LIVEMINT,(May 06, 2020. 06:34 PM) https://www.livemint.com/Industry/XmEtCCZklNL5w0LmQ9K7lJ/What-is-an-IFSC-and-how-does-it-work.html. [2] Section 5, International Financial Services Center Authority Act, 2019, No. 50, Act of Parliament, 2019 (India) [3] The International Financial Services Center Authority Bill, 2019, PRS LEGISLATIVE RESEARCH, (May 07, 2020, 12:06 AM) https://www.prsindia.org/billtrack/international-financial-services-centres-authority-bill-2019-0. [4] Section 15, International Financial Services Center Authority Act, 2019, No. 50, Act of Parliament, 2019 (India) [5] Section 17, International Financial Services Center Authority Act, 2019, No. 50, Act of Parliament, 2019 (India) [6] Arfa Javaid, What is IFSC Authority Controversy?,JAGRAN JOSH, (May 07, 2020. 02:00 AM) https://www.jagranjosh.com/general-knowledge/ifsc-authority-controversy-1588669555-1. DISCLAIMER: Views and opinions as expressed in the Research Articles are solely of the author and any member of the core team of the website shall not be liable for the same.

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