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Banking

Pursuant to the Reserve Bank of India Notification No. FEMA.339/2015-RB dated March 02, 2015 under FEMA 1999 on Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 setting out RBI regulations relating to financial institutions set up in International Financial Services Centres (IFSC), RBI has formulated a scheme for the setting up of IFSC Banking Units (IBUs) by Indian banks and foreign banks already having presence in India.

The IFSC banking units will be able to provide foreign currency financing requirements of the Indian corporates as well for overseas entities. The Branch will operate as an offshore branch.

Eligible banks interested in setting up IBUs will be required to obtain prior permission of the Reserve Bank for opening an IBU under Section 23 (1)(a) of the Banking Regulation Act, 1949 (BR Act). For most regulatory purposes, an IBU will be treated on par with a foreign branch of an Indian bank.

IBUs can provide a wide range of Corporate Banking services as below.

Opportunities

Benefits

Foreign currency transactions

Enable opening of foreign currency current accounts for offshore / foreign currency transactions by institutional clients

Ability to transact in foreign currency in the offshore markets from the IFSC

Deployment of funds to Indian Residents

Provide ECBs to the Indian entities seeking foreign currency funds as permitted under the FEMA regulations

Ability to meet the foreign currency requirements of the corporates in India, foreign subsidiaries of Indian corporates (subject to FEMA provisions) as well as foreign companies

Deployment of funds to non-residents (other than individual/retail customers/ HNIs)

The IBUs will be able to meet the foreign currency requirements of WOS/JVs of Indian corporates abroad and Foreign Corporates.

IBUs will be allowed to provide:

  • Foreign currency loans

  • Project finance, loan syndication

  • Trade finance – import/export finance, buyers credit Buying & Selling of various currency, Providing trade loans to correspondent banks

Factoring/Forfaiting of trade receivables

Provide factoring & forfaiting services as part of the trade finance requirements to the non-resident entities such as WOS/JVs of Indian corporates abroad and foreign corporates

Ability to tap the growing trade activities in the region

Raising funds from Non-Residents

IBUs will be able to source (or borrow) funds in foreign currency in order to meet the requirements of both Indian residents (as per FEMA) and non-residents.

The long-term borrowings (> 1 year) will be mostly through:

  • Borrowings from foreign banks & other IBUs
  • Debt issuance in IFSC & international bond markets
  • Bulk deposits from foreign corporates/ WOS of Indian corporates registered abroad
  • Current account balance from institutional clients
  • Market borrowings such as inter-bank borrowings, debtissuance etc.
  • The IBUs will also be allowed to raise short term liabilities (< 1 year) from foreign banks and IBUs
  • Ability to source funds from nonresidents looking to invest in the subcontinent

Ability to source funds from nonresidents looking to invest in the subcontinent

Dealing in derivative & structured products

Deal in derivatives and structured products based on single or basket of securities, options, indices, debt securities, swaps, etc. in the foreign and IFSC markets IBUs will be able to deal with Currency Derivatives listed on the exchanges in Foreign and IFSC markets

Ability to provide products to hedge the risk exposure of a portfolio

Foreign Banks

The Reserve Bank has issued a notification under FEMA vide Notification No. FEMA.339/2015-RB dated March 02, 2015 setting out RBI regulations relating to financial institutions set up in International Financial Services Centres (IFSC) under which RBI has formulated scheme for the setting up of IFSC Banking Units (IBUs) by Foreign banks in IFSCs.

Foreign banks would be able to carry out following Business thru IBU at GIFT IFSC

  • Foreign currency loans to non-residents {Foreign Corporates & Wholly Owned Subsidiaries (WOS)/Joint Ventures (JV) of Indian Corporate}
  • Provide ECBs to Indian entities seeking foreign currency funds as permitted under FEMA
  • Project Finance for Foreign Corporates & WOS/JVs of Indian Corporates
  • Provide corporate banking facilities to various units in SEZ & IFSC
  • Factoring & forfaiting services as part of the trade finance requirements to WOS/JVs of Indian corporates abroad and foreign corporates & Letter of Credit and Bank Guarantee for oversees transactions (Inward & Outward)
  • FOREX Transactions (Buying & Selling of various currency)
  • Bulk deposits from Foreign Corporates / WOS of Indian Corporates
  • Market borrowings such as inter-bank borrowings, debt issuance etc.
  • Derivatives and structured products – swaps, futures, etc.
  • Providing trade loans to correspondent banks

Application process:

Step 1: Identify the office space in GIFT IFSC

Step 2: Application to SEZ Development commissioner for SEZ approval

Step 3: Application to Reserve Bank of India for setting up IFSC Banking UNIT

Kindly note RBI has not provided any specific format for the application to be made for IBU.

Mr. R. K Patil, Department of Banking Regulation Central Office Mumbai can be contacted for IFSC matters. You may get in touch at rkpatil@rbi.org.in for your application.

 

Indian Banks

Indian Banks would be able to carry out following Business thru IBU at GIFT IFSC

The Reserve Bank has issued a notification under FEMA vide Notification No. FEMA.339/2015-RB dated March 02, 2015 setting out RBI regulations relating to financial institutions set up in International Financial Services Centres (IFSC) under which RBI has formulated scheme for the setting up of IFSC Banking Units (IBUs) by Indian banks in IFSCs.

  • Foreign currency loans to non-residents {Foreign Corporates & Wholly Owned Subsidiaries (WOS)/Joint Ventures (JV) of Indian Corporate}
  • Provide ECBs to Indian entities seeking foreign currency funds as permitted under FEMA
  • Project Finance for Foreign Corporates & WOS/JVs of Indian Corporates
  • Provide corporate banking facilities to various units in SEZ & IFSC
  • Factoring & forfaiting services as part of the trade finance requirements to WOS/JVs of Indian corporates abroad and foreign corporates & Letter of Credit and Bank Guarantee for oversees transactions (Inward & Outward)
  • FOREX Transactions (Buying & Selling of various currency)
  • Bulk deposits from Foreign Corporates / WOS of Indian Corporates
  • Market borrowings such as inter-bank borrowings, debt issuance etc.
  • Derivatives and structured products – swaps, futures, etc.
  • Providing trade loans to correspondent banks

Application process:

Step 1: Identify the office space in GIFT IFSC

Step 2: Application to SEZ Development commissioner for SEZ approval

Step 3: Application to Reserve Bank of India for setting up IFSC Banking UNIT

Kindly note RBI has not provided any specific format for the application to be made for IBU.Mr. R. K Patil, Department of Banking Regulation Central Office Mumbai can be contacted for IFSC matters. You may get in touch at rkpatil@rbi.org.in for your application.