GIFT City regulator IFSCA will introduce regulatory changes by the end of this month to help funds operating in the international financial services centre (IFSC) lower their operational costs while serving the Indian market, Chairman K Rajaraman said on Monday.

Currently, there are about 180 funds registered with the International Financial Services Centres Authority (IFSCA).

This initiative is part of the regulator’s broader efforts to encourage financial institutions in GIFT City to offer capital and other financial services to Indian companies at globally competitive rates, Rajaraman said at the GreenReturns Summit 2024, organised by the Indian Venture and Alternate Capital Association (IVCA) in New Delhi.

“If Indian corporates are to become global champions, they must access capital at globally competitive rates. Without competitive inputs, one cannot expect competitive outputs,” Rajaraman said.

“How do we cut away the layers of costs that the industry should not be saddled with if it wants to become global champions? That is what we are now focused on” he added.

He highlighted that the IFSCA has now shifted its focus from ‘Onshoring the Offshore’ to ‘India at 2047’. When the IFSCA was first set up in 2019, its main objective was to ensure ‘Onshoring the Offshore,’ Rajaraman noted.

“Our thought process now is about how to support the Indian economic landscape in becoming a developed country by 2047. It will require more than a normal and ordinary effort to get there. Among the variety of problems, one key issue is how to provide cost-effective financial services and cost-effective capital to Indian corporates,” he said.

Private debt funds

IFSCA sees a great opportunity for Indian corporates to raise green debt through Gift City banks, he said. There is also an opportunity to establish more private debt funds. “Private debt funds can be set up. Our job is to facilitate that. We will explore ways to reduce the cost of operations in Gift City by making our regulations more efficient for them,” Rajaraman said.

Last year, IFSCA mandated that banks operating in GIFT City must lend at least 5 per cent towards green credit. As on date, they have lent around $3 billion, exceeding the 5 per cent requirement, as green credit.

Today, five years since IFSCA came into being, GIFT City has 28 international and local banks that have set up business there. The total asset size of these lenders stands at $71 billion, of which around $50 billion has been lent to corporates in India and abroad.

As on date, GIFT City has about 180 registered funds, two international stock exchanges, a bullion exchange, and 16 insurance companies, besides other players in the financial services ecosystem.

Rajaraman said that IFSCA also expects transition finance instruments to be launched in the coming days from GIFT City. “There is a long way to go, but we have covered initial ground. We expect the market here to look at greater innovations,” he added.

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