Explained: Bill to set up a unified Authority to regulate financial products

News:The International Financial Services Centres Authority Bill,2019 is likely to be tabled in the Parliament.

Facts:

About IFSC:

• International Financial Services Centres(IFSC) is a jurisdiction that provides financial services to resident and non-resident Indians in foreign currencies. 
• They are intended to provide Indian corporates with easier access to global financial markets, and to complement and promote the further development of financial markets in India.
• GIFT (Gujarat International Finance Tec-City) located in Gandhinagar is India’s first International Financial Services Centre.

Why the need of the authority?

• Currently,the banking, capital markets and insurance sectors in IFSC are regulated by multiple regulators such as RBI, SEBI and IRDAI.
• The dynamic nature of business in the IFSCs necessitates a high degree of inter-regulatory coordination.It also requires regular clarifications and frequent amendments in the existing regulations governing financial activities in IFSCs.
• The development of financial services and products in IFSCs would require focussed and dedicated regulatory interventions.
• Hence,a need for a unified financial regulator for IFSCs in India to provide world class regulatory environment to financial market participants.

About International Financial Services Centres Authority Bill,2019:

• The Bill provides for the establishment of an Authority to develop and regulate the financial services market in the International Financial Services Centres in India.
• The Bill will be applicable to all International Financial Services Centres (IFSCs) set up under the Special Economic Zones Act, 2005.

Composition of the authority:

• The International Financial Services Centres Authority will consist of nine members, appointed by the central government.
• They will include the chairperson of the authority, a member each from the RBI, SEBI, IRDAI, PFRDA and two members from the Ministry of Finance. 
• In addition,two other members will be appointed on the recommendation of a Search Committee.
• All members of the IFSC Authority will have a term of three years, subject to reappointment.

Functions of the authority:

• The Authority will regulate financial products such as securities, deposits or contracts of insurance, financial services, and financial institutions which have been previously approved by any appropriate regulator such as RBI or SEBI in an IFSC.
• It will also follow all processes which are applicable to such financial products, financial services and financial institutions under their respective laws.
• The authority will also regulate any other financial products, financial services or financial institutions in an IFSC which may be notified by the central government.