Module: | MODULE A: INTERNATIONAL BANKING
Q209: Consider the following statements regarding the International Financial Services Centres Authority and the core regulatory framework of GIFT City:
Statement 1: The International Financial Services Centres Authority was established to serve as a unified regulator, thereby consolidating the regulatory powers previously held by the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority of India, and the Pension Fund Regulatory and Development Authority for these specific zones.
Statement 2: Entities established within the GIFT City International Financial Services Centre are treated as resident entities under the Foreign Exchange Management Act of 1999, which legally requires them to conduct all core business transactions exclusively in Indian Rupees.
Statement 2: Entities established within the GIFT City International Financial Services Centre are treated as resident entities under the Foreign Exchange Management Act of 1999, which legally requires them to conduct all core business transactions exclusively in Indian Rupees.
✅ Correct Answer: A
The International Financial Services Centres Authority was established under the International Financial Services Centres Authority Act of 2019.
Its primary structural purpose is to act as a unified regulator, absorbing the powers of the four domestic financial regulators to promote ease of doing business without jurisdictional overlap.
Therefore, Statement 1 is correct.
Statement 2 is incorrect.
A fundamental pillar of the GIFT City framework is that entities registered within the International Financial Services Centre are treated as non-residents under the Foreign Exchange Management Act of 1999.
Because of this non-resident legal status, they are exempt from standard domestic exchange controls and must conduct their core financial operations and transactions in freely convertible foreign currencies, such as the United States Dollar or the Euro, rather than Indian Rupees.
Its primary structural purpose is to act as a unified regulator, absorbing the powers of the four domestic financial regulators to promote ease of doing business without jurisdictional overlap.
Therefore, Statement 1 is correct.
Statement 2 is incorrect.
A fundamental pillar of the GIFT City framework is that entities registered within the International Financial Services Centre are treated as non-residents under the Foreign Exchange Management Act of 1999.
Because of this non-resident legal status, they are exempt from standard domestic exchange controls and must conduct their core financial operations and transactions in freely convertible foreign currencies, such as the United States Dollar or the Euro, rather than Indian Rupees.