'GIFT City can become a global financial destination,' says K. Rajaraman, head of top regulatory body IFSCA

Source: Business Today

Seasoned bureaucrat K. Rajaraman, who was earlier Telecom Secretary, took charge as Chairperson of International Financial Services Centres Authority (IFSCA)—tasked with regulating and developing international financial services centres (IFSCs) in India—in July 2023. In an interview with Business Today, Rajaraman says the IFSCA is working with the central and state governments to attract businesses to GIFT City and develop the talent pool required by these firms. Edited excerpts:

Many companies plan to move to GIFT City from other similar jurisdictions. Are businesses becoming more confident?

I will give a specific example of the shipping industry. Indians own a lot of ships but they are all owned outside the country in Dubai, Singapore, Panama, Liberia, and Greece. We believe that if we are able to mimic or produce the same kind of regulatory environment here, they wouldn’t mind coming here as most of their business is India-facing. About eight ship lessors have registered here and at least two bulk carriers have been leased out of GIFT City in the past couple of months. A of couple of transactions have also been funded out of GIFT City, so I think the ecosystem is building up.… Further policy reforms will enable a lot of these foreign-located Indian businesses to relocate

Will more policies be announced?

Yes, we are working on a few more [policies]. We do core financial services and we have more than 26 banks here, which provide trade finance, ECBs (external commercial borrowings), and also do overseas derivative instruments and provide hedging services. Our focus is also to build IFSC into a reinsurance hub… India’s traditional strength lies in having the world’s largest talent pool of English-speaking professionals such as accounting specialists, compliance specialists, [and] engineers. India has been the research back office of the world and is also the business process outsourcing destination. The finance minister had said that a comprehensive framework would be announced soon to make GIFT City a global hub for business accounting, compliance services, auditing and the notifications are under process. Once that is done, that will be a great job generator. While core financial services will employ a lesser number of people, the service providers will employ a lot more people.

The announcement on direct listing at GIFT City has been a source of excitement for companies. What do you think?

Indian companies are already raising capital through the ECB route, but they may also want to raise dollar equity... and we’re giving them an option. What is Viksit Bharat@2047? The concept is that Indian businesses can no more afford to stay local… they have to have a global footprint. We want more midsize companies to develop a global footprint. For this, we will have to provide them with the ability to access all forms of international capital… Some companies may want to do a dual listing—a listed company may want to do an international listing to raise some dollar capital. Or there could be some start-up or tech company that has not done an IPO and feels it has a better valuation in an international marketplace. So, it may want to do the initial listing here.  

In the past, you have spoken about an instant settlement system at GIFT City...

The banks here settle payments through the correspondent banking system, which means that they use SWIFT [messaging] that goes to New York and comes back. There is a time lag… But people are looking for instant- or near-instant settlement, which can be possible through an RTGS kind of system. We want to set up a similar system here, but not necessarily run by us. We will probably let a market participant or a consortium run this facility… On the payments system, the consultations are over and the regulations will release sometime in January

There is a view that GIFT City has not taken off like a Dubai or Singapore IFSC. What’s your view?

A lot of residential buildings [and] infrastructure development are under planning or under construction. The GIFT City authority is developing the social infrastructure. The metro link will be inaugurated [soon], which will provide direct connectivity to the airport and the city (Ahmedabad). The Mumbai-Ahmedabad high-speed railway line is likely to come up by 2027... GIFT City has the ability to become an international financial destination.

How long will this take?

You will see this taking shape in about five years. We already have about 25,000-26,000 people working here. Many offices such as that of IBM and Google are coming up. Maybe [in the] next five years we’ll have at least about 60,000 people working out of this place. Simultaneously, the state government and other entities, including IFSCA, are working on deepening the talent pool... We have brought out a universities framework… We are also actively working with sectoral regulators.