Posts

Finance Companies / Units in International Financial Services Centre (IFSC)

– Anirudh Grover, Executive | finserv@vinodkothari.com

Table of Contents

BackgroundIFSCA Framework for Finance Companies / Units Implications under FEMA
What are Finance Companies and Finance Units?Registration RequirementsAsset Side Transactions
What does a finance company/unit do?Owned Funds requirementCapital and Liabilities Side Transactions
Can they accept deposits?Corporate Governance AspectsDifference between Finance Company / Unit & NBFCs
Liquidity Risk Management (LRM) FrameworkConclusion

Background

International Finance Service Centre (IFSC) is a designated zone physically situated in India but is not considered a part of India. As the name suggests, it is a designated centre set up for the purpose of enabling international financial services, the key word here being international. The purpose is not only to bring global funds into the country but also facilitate such transactions through this zone which otherwise would have been carried out by foreign branches of domestic entities. This purpose is intended to be achieved through establishment of various businesses such as banking units, fund management entities, finance companies etc. We have discussed in depth about the concept of IFSCs along with the applicability of the domestic regulatory framework in our write-up Financial entities in IFSC: A primer.

The objective of this paper is to picture a comprehensive image of all the aspects of finance entities starting from what is meant by finance companies to all the regulatory exposure it has to bear while undertaking any kind of activities.

Read more