IFSCA Official has introduced a revised DRAFT framework to streamline operations for Global/Regional Corporate Treasury Centres (GRCTC) in the International Financial Services Centre (IFSC). This comprehensive framework aligns with global best practices to attract multinational corporations while ensuring robust oversight and governance.
What are GRCTCs? GRCTCs operate as in-house banks for multinational corporations (MNCs), centralizing treasury activities such as fund management, liquidity optimization, and financial advisory. By serving group entities across jurisdictions, GRCTCs enhance financial efficiency and minimize risks.
Key Features of the Revised DRAFT Framework on GRCTCs
1. Eligibility Criteria
To establish a GRCTC in IFSC, applicants must:
Obtain a Certificate of Registration as a Finance Company or Finance Unit under IFSCA regulations.
Ensure operations are not set up by splitting or reorganizing existing operations in India.
Avoid transferring existing contracts or employees from service recipients in India, except under specified guidelines.
Possess infrastructure such as adequate office space, equipment, and manpower within IFSC.
Comply with fit-and-proper norms for directors and key personnel.
Serve at least one entity domiciled outside India or having a foreign branch office.
2. Permissible Activities
GRCTCs can undertake a wide range of financial activities, including:
Borrowing and credit arrangements.
Investment in securities for liquidity management.
Factoring, forfaiting, and re-invoicing.
Foreign exchange transactions in designated currencies.
Advisory services in financial risk management, tax planning, and capital market strategies.
Management of obligations toward insurance and pension-related commitments.
Liquidity management through pooling and optimizing group financial resources.
Compliance Note: All activities must adhere to IFSCA guidelines and other relevant regulations, ensuring operational transparency and accountability.
3. Capital Requirements
GRCTCs must maintain a minimum owned fund of USD 0.2 million at all times.
Branch-based GRCTCs can maintain the fund requirement at the parent level.
4. Governance and Risk Management
Each GRCTC must implement a Board-approved corporate governance policy.
A robust risk management policy is mandatory, with periodic reviews to address evolving risks.
Parents of branch-based GRCTCs must appoint a governing body to oversee compliance.
5. Currency Operations
GRCTCs can transact in currencies approved under the IFSCA (Banking Regulations), 2020.
Transactions in other currencies are allowed if settled outside IFSC.
INR transactions are permissible under specified provisions, including derivative transactions settled in foreign currencies.
6. Service Recipients
GRCTCs may perform treasury activities and/or provide treasury services to the following: Their group entities. Group entities of their parent or branches of such entities.
Entities eligible as service recipients must be domiciled in jurisdictions not identified as ‘High-Risk Jurisdictions’ by the Financial Action Task Force (FATF).
GRCTCs may cater to service recipients domiciled in India under the condition that all transactions comply with the Foreign Exchange Management Act, 1999 (FEMA).
7. Fee Structure
The framework outlines a clear fee structure to facilitate compliance:
Application Fee: USD 1,000 (non-refundable).
Registration Fee: USD 25,000 (one-time).
Recurring Fee: USD 25,000 (annual).
Fees must be paid as per the IFSCA Circular on Fee Structures (No. 865/IFSCA/Banking/Fee Revision/2022-23).
8. Provisional Registration and Grant of License
IFSCA may issue a provisional registration for applicants meeting preliminary conditions, allowing time to comply fully.
The final Certificate of Registration will be granted upon satisfying all conditions outlined in the framework.
9. Compliance and Reporting
GRCTCs must maintain records of all transactions, ensuring proper audit trails.
Regular reporting to IFSCA is mandatory, covering operational updates and material changes in information.
Benefits of the Revised Framework
Global Alignment: Introduces practices aligned with international treasury centers, making IFSC globally competitive.
Operational Flexibility: Expands permissible activities, enhancing financial and operational efficiency.
Simplified Governance: Encourages transparency and accountability through governance and compliance mandates.
Attractive Fee Structure: Competitive fees ensure cost-effective operations for multinational corporations.
Broader Currency Options: Flexibility in currency transactions supports seamless global operations.
Public Consultation
IFSCA has invited comments and suggestions from stakeholders on the revised framework until October 2, 2024. Feedback will help refine and implement the framework, ensuring it meets industry expectations and regulatory standards. Mail at riddhi.bhandari@ifsca.gov.in and Mr. Lobhas Khairnar (Manager), IFSCA at lobhas.khairnar@ifsca.gov.in
Conclusion The revised GRCTC framework reaffirms IFSC’s commitment to becoming a global hub for treasury operations. It offers a robust regulatory environment while promoting efficiency and innovation for multinational corporations. By adopting this framework, IFSC strengthens its position as a premier destination for global finance.
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