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CTBC Bank, the largest privately owned bank in Taiwan, applied to the International Financial Services Authority (IFSCA) for setting up a IFSC Banking Unit (IBU) in GIFT City.

What is an IFSC Banking Unit (IBU)?

It is a special branch of a bank that operates within an International Financial Services Centre (IFSC), like GIFT City. These units deal mainly in foreign currencies and offer financial services to international clients or Indian companies dealing with foreign business.

• Example: If an Indian company needs a loan in US dollars for its international trade, or a Taiwanese businessman wants to invest in India, an IBU in GIFT City can help them directly without needing to go through complex international banking procedures.

What is GIFT City?

GIFT City, or Gujarat International Finance Tec-City, is India's first and currently only International Financial Services Centre (IFSC). 

It operates under the Special Economic Zone (SEZ) Act.

It has its own special rules and regulations that are different from India's domestic financial rules, designed to attract international business.

What are the key tax benefits and incentives for businesses in GIFT City?

Corporate Income Tax Exemption => Businesses operating in the IFSC within GIFT City can get a 100% tax exemption on their profits for any 10 consecutive years within their first 15 years of operations.  

No Goods and Services Tax (GST) => Many services provided by IFSC units or services received by them are exempt from GST.

Foreign Exchange Freedom =>  GIFT City is treated like a "foreign territory" under India's foreign exchange laws (FEMA Regulations). This allows for easier and more liberal foreign exchange transactions.

Diverse Financial Services => Institutions can offer traditional services like banking, insurance, and capital markets (stock exchanges).

International Arbitration Centre => GIFT City is setting up its own international arbitration center to resolve disputes faster and according to international laws.

What is the International Financial Services Centres Authority (IFSCA)?

Before IFSCA, different financial regulators (like the Reserve Bank of India for banks, SEBI for markets, IRDAI for insurance, and PFRDA for pensions) each regulated parts of the business in IFSCs. This could be confusing and slow things down. 

• The government created IFSCA in 2020, under the International Financial Services Centres Authority Act, 2019.

It is a "unified authority," responsible for developing and regulating financial products, services, and institutions within International Financial Services Centres (IFSCs).

It is headquartered at GIFT City, Gandhinagar, in Gujarat.

Who are the members of IFSCA?

The IFSCA consists of nine members appointed by the central government;

• The chairperson of the authority.
• One member each from the Reserve Bank of India (RBI), SEBI, IRDAI, and PFRDA.
• Two members from the Ministry of Finance.
• Two other members appointed based on recommendations from a special Selection Committee.

All members of the IFSCA Authority serve for a term of three years. They can also be reappointed for additional terms.

What is India's Vision with GIFT City?

Become a Global Financial Hub => Develop a strong global connection and attract international financial services.

• Before GIFT City, many Indian companies did their international financial transactions through centers in places like Dubai or Singapore. GIFT City aims to bring that business back to India.

Serve the Indian Economy => Focuses on the specific financial needs of the growing Indian economy, also creates job opportunities.

Act as a Regional Platform => Serve as an international financial platform for the entire South Asian region.

Boost Competitiveness =>  By offering a world-class environment and special rules, India wants to make its financial services sector more competitive globally.

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Source: THE HINDU BUSINESSLINE