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The International Financial Services Centre (IFSC) Authority has granted permission to IFSC Banking Units, registered with SEBI as Foreign Portfolio Investors (FPIs), to issue derivative Instruments with Indian securities as underlying assets in the GIFT-IFSC.
A derivative is an instrument whose value is derived from the value of one or more underlying assets, which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc The decision follows an earlier announcement made by the Union Minister of Finance and Corporate Affairs during the Budget Speech of 2023-24. It was declared that Offshore Derivative Instruments (ODIs) issued in GIFT-IFSC would be recognized as valid contracts. Subsequently, an amendment to Section 18A of the Securities Contracts (Regulation) Act, 1956, was made to formalize the recognition of derivatives contracts regulated by IFSC Authority (IFSCA) and issued in IFSC by FPIs as legal and valid. According to a circular issued by IFSCA, non-bank entities registered with SEBI as FPIs are also permitted to issue Derivative Instruments with Indian securities as underlying assets in GIFT-IFSC. However, it is imperative for the entity issuing such Derivative Instruments to ensure compliance with the requirements on issuance of ODIs, as prescribed by SEBI and IFSCA from time to time. Furthermore, the entity is mandated to furnish requisite information to the Clearing Corporations in GIFT-IFSC in the prescribed format by the tenth day of every month. This move is expected to enhance the scope and depth of financial services offered within the GIFT-IFSC ecosystem, thereby attracting more investors and boosting overall market activity. With the expansion of permissible activities for FPIs in GIFT-IFSC, India aims to reinforce its position as a global financial hub and foster greater participation in its financial markets. (ANI)
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