Module: | MODULE A: INTERNATIONAL BANKING
Q216: Consider the following statements regarding the operational currency guidelines for business units operating in the GIFT City International Financial Services Centre:
Statement 1: While Banking Units must conduct their core financial operations in freely convertible foreign currencies, they are legally permitted to maintain Special Non-Resident Rupee accounts specifically to meet their day-to-day administrative and statutory expenses in Indian Rupees.
Statement 2: Regulatory guidelines mandate that all financial service-related monetary transactions executed by units within the centre must be routed exclusively through the centre's own Banking Units, strictly prohibiting the use of standard domestic bank branches for such core transactions.
Statement 2: Regulatory guidelines mandate that all financial service-related monetary transactions executed by units within the centre must be routed exclusively through the centre's own Banking Units, strictly prohibiting the use of standard domestic bank branches for such core transactions.
✅ Correct Answer: C
Because units within the centre are treated as non-residents under foreign exchange laws, their primary balance sheet and core transaction currency must be a freely convertible foreign currency, such as the United States Dollar.
However, because they physically operate their offices on Indian soil, they incur local expenses such as rent, employee salaries, and utility bills.
Therefore, Statement 1 is correct; they are permitted to open Special Non-Resident Rupee accounts strictly for processing administrative and statutory payments in Indian Rupees.
Statement 2 is also correct.
To maintain the closed-loop integrity of the offshore financial ecosystem and to rigorously monitor international capital flows, regulators require that all core financial monetary transactions of these units be routed exclusively through recognized Banking Units located within the centre, rather than through standard domestic banks located in the broader Indian tariff area.
However, because they physically operate their offices on Indian soil, they incur local expenses such as rent, employee salaries, and utility bills.
Therefore, Statement 1 is correct; they are permitted to open Special Non-Resident Rupee accounts strictly for processing administrative and statutory payments in Indian Rupees.
Statement 2 is also correct.
To maintain the closed-loop integrity of the offshore financial ecosystem and to rigorously monitor international capital flows, regulators require that all core financial monetary transactions of these units be routed exclusively through recognized Banking Units located within the centre, rather than through standard domestic banks located in the broader Indian tariff area.