Establishing a Finance Company in GIFT City: A Comprehensive Guide

February 17, 2024

Interested in establishing a finance company in GIFT City? Explore our comprehensive guide to discover why GIFT City is the perfect location for your finance venture. Unlock the potential of finance company in GIFT City today!

Unlocking Opportunities: Establishing a Finance Company in GIFT City

GIFT City, or Gujarat International Finance Tec-City, stands as a beacon of India’s financial aspirations. Situated near Gandhinagar, Gujarat, it represents the nation’s inaugural operational greenfield smart city project, conceived and nurtured by the Government of Gujarat. With its strategic location between Ahmedabad and Gandhinagar on the banks of the Sabarmati River, GIFT City boasts a diverse array of amenities, including office spaces, residential accommodations, educational institutions, healthcare facilities, hospitality services, and recreational options. This integrated ecosystem provides residents with a truly holistic living experience.

At the heart of GIFT City lies its International Financial Services Centre (IFSC), designed to attract global financial institutions, insurers, banks, and fintech enterprises. Bolstered by a favorable tax regime, GIFT City aims to serve as a global financial hub, offering individuals and corporations worldwide access to high-quality financial products and services.

Vision and Concept:

Established in 2007, GIFT City represents India’s premier greenfield smart city project and serves as an International Financial Services Centre (IFSC).
Crafted to emerge as a preeminent financial and IT hub, it boasts cutting-edge infrastructure and services tailored to entice global enterprises.
Spanning 886 hectares, GIFT City comprises three distinct zones: the International Financial Services Centre (IFSC), the Multi-services Special Economic Zone (SEZ), and the Domestic Tariff Area (DTA).

Key Features: Business-Friendly Atmosphere:

* Business-Friendly Environment:

Simplified processes and streamlined approvals through a single-window clearance mechanism.

A competitive tax regime offering advantageous rates and incentives.

Effortless compliance facilitated by simplified regulations and user-friendly online services.

* Sustainable Development:

Emphasis on green initiatives to enhance energy efficiency and minimize waste generation.

Integration of smart city features to optimize resource consumption and promote sustainable growth.

* Diverse Opportunities:

IFSC serves as a financial nucleus, while the SEZ attracts IT/ITES enterprises and the DTA caters to domestic businesses.

Provides a comprehensive platform for economic expansion and development.

* Strategic Location:

Exceptional connectivity facilitated by proximity to Ahmedabad and an international airport.

Seamless accessibility for businesses and travelers, augmenting its status as a premier financial destination.

Finance Companies in GIFT City:

Finance Companies (FCs) operating within GIFT City’s IFSC are subject to regulations set forth by the International Financial Services Centres Authority (IFSCA). These regulations enable FCs to engage in various financial activities, including lending, investment operations, and global treasury functions. FCs, operating as distinct entities sans public deposits, offer a plethora of financial services. Entrepreneurs must adhere to both Reserve Bank of India (RBI) and IFSCA regulations, thereby fostering a dynamic financial environment within GIFT City. With specialized types such as loan finance and microfinance, FCs cater to specific market demands, enriching GIFT City’s financial landscape.

Permissible Activities in GIFT City:

Finance companies in GIFT City enjoy a broad spectrum of permissible activities, encompassing core and non-core functions:

Core Activities:

To achieve sustained growth, addressing these hurdles is crucial. Here are some key areas to consider:

Regulatory Compliance: Understand KYC/AML and data privacy laws, engage proactively, and use compliance tech.
Trust and Security: Invest in secure infrastructure, encryption, and transparency for sensitive data.
Competition: Stand out with niche offerings, innovation, and clear value propositions.
Funding and Talent: Demonstrate profitability, strong leadership, and offer competitive packages.
User Adoption: Educate users on benefits, build trust, and emphasize security.
Interoperability: Prioritize seamless integration with open APIs and smooth data flow.
Global Expansion: Adapt to diverse regulations and cultures while ensuring compliance.
Additional Challenges: Address financial inclusion, infrastructure limitations, and ethical data usage.

Non-Core Activities:

Merchant Banking: Advises on mergers, acquisitions, and restructuring.
Authorized Person: Facilitates securities issuance and ensures compliance.
Registrar & Share Transfer Agent: Manages ownership transitions and maintains shareholder records.
Trusteeship Services: Manages assets on behalf of individuals or organizations.
Investment & Portfolio Management: Provides personalized investment advice and manages client portfolios.
Mutual Fund & Insurance Distribution: Sells mutual fund units and insurance products.
Exchange & Clearing: Participates in trading and clearing activities.
Aircraft & Ship Leasing: Facilitates mobility across industries.
Asset Management Support: Provides specialized services to asset managers.
Uncharted Territory: Explores additional approved non-core activities.

Requirements for Establishing a Finance Company in GIFT City:

Businesses aspiring to establish Finance Companies in GIFT City must fulfill operational, regulatory, and financial prerequisites:

Operational Requirements:

Must be incorporated under Indian law with a minimum net worth of INR 50 crore.
Maintain a capital adequacy ratio of at least 15%.
Board of directors should have at least 50% independent directors.
Appoint a compliance officer and establish a risk management committee.
Implement a whistle-blower policy to protect employees reporting unethical behavior.

Regulatory Requirements:

Obtain a certificate of registration from IFSCA.
Maintain minimum owned funds as prescribed.
Balance sheet must be in a freely convertible foreign currency.
Comply with Companies Act, 2013 and FC Regulations.

Other Financial Requirements:

Maintenance of minimum capital and liquidity coverage ratios as determined by IFSCA.

Solicitation of specific approval for the parent entity to maintain LCR for the finance unit.

Limitation of exposure to single counterparties to 25% of the available eligible capital base without IFSCA approval.

Benefits of Establishing a Finance Company in GIFT City:

Establishing a finance company in GIFT City’s IFSC offers a plethora of advantages:

Tax Benefits: Enjoy 100% tax exemption on profits for a decade, MAT exemption, and exemption from GST on IFSC services.
Regulatory Advantages: Streamlined approval process, flexible regulatory framework, and single-window clearance.
Operational Efficiency: Cutting-edge infrastructure, access to global talent, proximity to financial centers, and cost competitiveness.
Additional Benefits: Access to international investors, promotion of innovation, and a platform for global expansion.

Gift City's Benefits for Startups:

GIFT City provides FinTech startups with a conducive environment for innovation through dedicated regulatory sandboxes. Endorsed by the Department for Promotion of Industry and Internal Trade (DPIIT), startups can operate within limited real customer environments for a specified duration. These sandboxes include the IFSCA FinTech Regulatory Sandbox, IFSCA FinTech Innovation Sandbox, Inter-Operable Regulatory Sandbox, and Overseas Regulatory Referral Mechanism.

Registered Finance Companies in GIFT City

Banking:

HSBC GIFT City Branch
ICICI Bank GIFT City Branch
Kotak Mahindra Bank GIFT City Branch
Standard Chartered Bank GIFT City Branch
Yes Bank GIFT City Branch

Insurance:

Edelweiss Tokio Life Insurance
HDFC Life Insurance
ICICI Lombard General Insurance
Kotak Mahindra General Insurance
Reliance General Insurance

Capital Markets:

Bajaj Finserv Securities
Edelweiss Financial Services
ICICI Direct
Motilal Oswal Financial Services
Nomura Securities
Asset Management:
Aditya Birla Sun Life AMC
Axis Mutual Fund
HSBC Global Asset Management
ICICI Prudential Mutual Fund
Reliance Mutual Fund

Aircraft Leasing:

Acumen Aviation Leasing IFSC Private Limited
Aerofin Ind Investments IFSC Pvt. Ltd.
Alvest Millennium Aviation Leasing IFSC Pvt. Ltd
Astraeus Services IFSC Ltd.
Carewell Flyjet IFSC Pvt. Ltd.
Darwin Platfrom Aircraft Leasing and Financing IFSC Ltd.
Jetsetfleet Management Services IFSC Private Limited
Modair Aviation IFSC Pvt. Ltd.
Nutana Aviation IFSC Private Limited
Sandhill Aviation IFSC Pvt. Ltd

Core Activity:

Avanse Global Finance IFSC Limited
India Exim Finserve IFSC Private Limited
India International Bullion Holdings IFSC Ltd
IOC Global capital management IFSC Ltd

International Trade Financing Platform:

Kredx Ventures IFSC Pvt. Ltd.
RXIL Global IFSC Ltd.
Vayana IFSC Pvt. Ltd

Shipping Leasing:

Jal Kumud Shipping IFSC Pvt Ltd.

Panbulk Shipping India IFSC Pvt. Ltd.

Ripley Shipping India IFSC Private Limited

RSCPL(IFSC) Pvt Ltd.

Conclusion:

Establishing a finance company in GIFT City presents an enticing opportunity for entrepreneurs and investors keen on tapping into India’s burgeoning financial landscape. By meeting the requisite criteria and leveraging GIFT City’s abundant talent pool, aspiring finance firms can position themselves for success and contribute significantly to realizing GIFT City’s vision as a premier global financial hub. With its supportive regulatory framework, state-of-the-art infrastructure, and strategic location, GIFT City offers an enabling environment for growth, innovation, and collaboration, rendering it an attractive destination for those aiming to thrive in the ever-evolving realm of finance.

CA Manish Mishra

Seasoned Chartered Accountant with over 15 years of industry experience. As a Virtual CFO and Startup Advisor, I'm passionate about supporting startups and small businesses on their journey to success. With a dedicated team by my side, we offer simple and practical financial advice to help you achieve your goals. Virtual CFO | Startup Advisory | NBFC & FinTech I Building Startup ecosystem to support the startups.

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