Lok Sabha passes International Financial Services Bill
The bill proposes to set up the International Financial Services Centres Authority that will regulate the financial services market in IFSCs in India.
The Lok Sabha passed the International Financial Services Centres Authority Bill, 2019 on December 11, 2019. The bill proposes setting of an authority to develop and regulate the financial services market in the International Financial Services Centres (IFSCs) in India.
The bill will be applicable to all the International Financial Services Centres in India, which were set up under the Special Economic Zones Act, 2005.
International Financial Services Centres Authority
The International Financial Services Centres Authority will comprise nine members including a Chairperson, all of whom will be appointed by the Union government. The members will comprise one each from RBI, SEBI, IRDAI and PFRDA and two officials from Union Ministry of Finance. The remaining two members will be appointed on the recommendation of a Search Committee.
All members will have a term of three years, subject to their reappointment.
• The International Financial Services Centres Authority will regulate all financial products including securities, deposits and contracts of insurance, financial services and financial institutions that were approved previously by appropriate regulators such as RBI or SEBI in an IFSC.
• The authority will follow all processes that apply to such financial products, financial services, and financial institutions as per their respective laws.
• The International Financial Services Centres Authority Bill, 2019 comprises a scheduled with a list of all appropriate regulators including the RBI, SEBI, IRDAI and PFRDA. The schedule can be amended by the central government through a notification.
• The authority will also regulate other financial products, financial services, or financial institutions in an IFSC that may be notified by the union government.
• The authority may also recommend other financial products, financial services or financial institutions to the centre, as permitted in an IFSC.
Performance Review Committee
The authority will be required to constitute a Performance Review Committee, which will review its functioning. The committee will comprise at least two members of the Authority.
The committee will be required to submit a report of its findings to the authority at least once every year.
Functions of the review committee:
• The committee will review whether the authority has followed the provisions of the applicable laws while exercising its powers and performing its functions.
• It will also review the regulations made by the Authority, and evaluate whether they promote transparency and best practices of governance.
• It will also review whether the authority is managing risks to its functioning in a reasonable manner.
• The International Financial Services Centres Authority Bill, 2019 has also proposed setting up of the International Financial Services Centres Authority Fund.
• All grants, fees, charges and sums received by the authority from different sources, as decided by the centre, will be credited to the fund.
• The fund will be utilized to give salaries, allowances and other remuneration to the members and employees of the Authority and for other expenses incurred by the Authority.
• The centre may provide grants to the authority for the regulation of IFSCs. Besides this, all transactions of financial services in the IFSCs will be done in the foreign currency specified by the Authority, in consultation with the central government.
The bill was introduced in the lower house by Union Finance Minister Nirmala Sitharaman on November 25, 2019. It was passed amid various objections by the opposition.
The bill was earlier withdrawn from the Rajya Sabha, as a finance bill is usually only tabled in the Lok Sabha. The bill had received approval from the Union Cabinet in February 2019.