RBI to pen norms for global finance centre

The Reserve Bank of India will formulate guidelines for the proposed International Financial Services Centre in Mumbai and the overseas banking units to be located in special economic zones within 60 days.

This was decided at a meeting with senior officials of the RBI, Finance and Commerce Ministries earlier this week. The guidelines will spell out the applicability of the stock exchange norms, insurance norms and banking norms in the IFSC.

Senior officials said that the finance ministry was examining the Malaysian model of the financial services centre. A report of the Mumbai-based Corporate Law Group on the contours of the proposed IFSC is also being examined by the RBI and the finance ministry.

"There is a view that there could be entry conditions imposed by the RBI to ensure that only large serious players come," an official said.

The SEZ Act states that the guidelines for the IFSC would be framed by the RBI, the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority.

The present SEZ rules state that an application for an OBU needs to be made to the RBI. The major incentives to OBUs is 100 per cent income-tax exemption for 5 years and 50 per cent for the next five year under Section 80L of the Income Tax Act.

The model being considered is Labuan in Malaysia, which as designated as an offshore international financial centre in 1990.

The IOFC offers a wide range of offshore financial products, including banking, investment banking, insurance, captives, trust business, fund management, investment holding, company management and Islamic financing.

There is a sense of urgency to put in place guidelines for the OBUs and the IFSC following the recommendation of the Indo-US CEOs forum to set up an IFSC in Mumbai with assistance from the United States.

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