IFSCA’s Game-Changing Amendment | Unlocking New Possibilities for IFSC Banking Companies in IFSC
- Blog|News|FEMA & Banking|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 13 July, 2023
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Introduction
The IFSCA vide notification dated July 6, 2023 notified an amendment to the IFSCA (Banking) Regulations, 2020. The amendment brings forth a significant change by allowing the establishment of a banking unit in an International Financial Services Centre (IFSC) as either an IFSC Banking Unit (IBU) or an IFSC Banking Company (IBC). Earlier, this option was not available for setting up an IFSC within a banking company.
The key highlights include the introduction of the terms “IFSC Banking Unit” and “IFSC Banking Company”, along with a provision that enables IFSC banking companies to establish banking units within IFSCs. Further, the criteria for granting a licence or permission to set up an IFSC banking company have been prescribed. The amendment shall be effective from 06.07.2023.
The key highlights of the amendment are discussed below –
1. IFSCA introduces/replaces/substitutes various definitions [Regulation 2]
The IFSCA has inserted, replaced, and substituted various definitions under Regulation 2 of the IFSCA (Banking) Regulations, 2020. The various amendments in Regulation 2 are as follows –
1.1. Substitution of definition of ‘Banking Unit’
The definition of ‘Banking Unit’ under Regulation 2(1)(c) has been substituted. The term “Banking Unit” or “BU” means a financial institution defined under Section 3(1)(c) of the Act that is licensed or permitted by the Authority to undertake permissible activities under these regulations.
1.2. Introduction of terms “IFSC Banking Company” and “IFSC Banking Unit”
The definitions of “IFSC Banking Company” and “IFSC Banking Unit” have been introduced under Regulations 2(1)(eb) & 2(1)(ec) respectively.
As per the amendment, the term “IFSC Banking Company” or IBC means a Banking Unit licensed or permitted by the Authority to operate in an IFSC as a subsidiary company of the Parent Bank.
While, the term “IFSC Banking Unit” or IBU means a Banking Unit licensed or permitted by the Authority to operate in an IFSC as a branch of the Parent Bank.
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