Page 36 - Banking Finance May 2025

A R T IC L E
ARTICLE
electronic payments, digital wallets, and fintech IFSCs. IFSCA is empowered to develop and regulate financial
innovations. Recent years have seen a focus on products, services, and institutions within IFSCs, enabling it
strengthening financial regulations and promoting financial to frame regulations and guidelines tailored to the unique
inclusion. Initiatives like Pradhan Mantri Jan Dhan Yojana needs of these centres. The Act ensures IFSCA operates
(PMJDY) have successfully brought millions of unbanked independently, allowing it flexibility to adopt international
individuals into the formal financial system. best practices and standards, crucial for enhancing
competitiveness on a global scale.
The RBI continues to play a crucial role in maintaining
financial stability and addressing issues such as non- The IFSCA (Banking) Regulations, 2020, were introduced to
performing assets (NPAs) and banking frauds. A significant operationalize the provisions of the IFSCA Act, 2019,
development is the establishment of the Gujarat specifically focusing on the banking sector within IFSCs.
International Finance Tec-City (GIFT City), India's first These regulations aim to attract international banking
International Financial Services Centre (IFSC). The creation institutions to India's IFSCs by creating a conducive
of the International Financial Services Centres Authority regulatory environment. They include provisions for
(IFSCA) and the introduction of the IFSCA (Banking) licensing, capital adequacy norms, risk management
Regulations, 2020, are strategic moves to position India as frameworks, and operational guidelines tailored to the
a global financial hub. These regulations aim to attract needs of banking entities operating within IFSCs.
international financial services, promote innovation, and
facilitate cross-border banking activities. The regulations encourage the adoption of innovative
technologies and practices, promoting fintech integration
From its early traditional banking roots to becoming a and digital banking services within IFSCs. Stringent
modern, technologically advanced, and globally integrated prudential norms and regulatory safeguards are
financial system, India's financial services sector has incorporated to ensure financial stability and integrity
undergone significant transformations. The IFSCA (Banking) within IFSCs, enhancing investor confidence and mitigating
Regulations, 2020, represent the latest phase in this risks.
evolution, with the potential to shape the future of banking
in India by fostering innovation, enhancing stability, and On the lines fo the above, the IFSCA Act, 2019, and IFSCA
promoting global financial integration. (Banking) Regulations, 2020, collectively represent India's
proactive approach towards becoming a global financial
Overview of the IFSCA Act, 2019 and hub. By providing a cohesive regulatory framework and
fostering an environment conducive to innovation and
IFSCA (Banking) Regulations, 2020 international business, these measures are poised to
The International Financial Services Centres Authority transform India's IFSCs into competitive global financial
(IFSCA) Act, 2019, marks a pivotal development in India's centres, attracting investments, enhancing financial
financial regulatory landscape, aimed at establishing a services, and contributing to overall economic growth.
unified framework for overseeing International Financial
Services Centres (IFSCs) in the country. The Act consolidates Key Provisions of IFSCA (Banking)
regulatory powers previously dispersed among multiple
regulators into a single authority, the IFSCA, ensuring Regulations, 2020
streamlined operations and enhancing the ease of doing The IFSCA (Banking) Regulations, 2020, introduced by the
business within IFSCs. The Act formally establishes the IFSCA International Financial Services Centres Authority (IFSCA),
as the regulatory body responsible for regulating financial focus on regulating banking activities within International
services within IFSCs, including banking, insurance, Financial Services Centres (IFSCs) in India. These regulations
securities, and fund management. are pivotal in creating a conducive environment for global
financial institutions to operate within IFSCs. Some of the
It consolidates regulatory functions that were previously key provisions of the IFSCA (Banking) Regulations, 2020:
under the purview of various regulators like the RBI, SEBI, 1. Licensing Requirements: The regulations outline the
IRDAI, and PFRDA, streamlining regulatory oversight within criteria and process for obtaining a banking license

32 | 2025 | MAY | BANKING FINANCE