Key Takeaways: Need for Legislation Establishment and Functions of Authority Accounts and Finance Functions Powers of Authority and Central Government Overview of Regulators in Other Countries

1. IFSC Authority Act, 2019
CA Divakar Vijayasarathy

2. Research Credits
Gracelin Lita
CA Jugal Gala

3. Legends used in the Presentation
CAG Comptroller and Auditor-General
CIS Credit Information Companies
FEMA Foreign Exchange and Management Act, 1999
IFC International Financial Centre
IFSC International Financial Services Centre
IRDAI Insurance Regulatory and Development Authority of India
MoU Memorandum of Understanding
PFRDA Pension Fund Regulatory and Development Authority
RBI Reserve Bank of India
SEZ Special Economic Zone
SEBI Securities and Exchange Board of India

4. Presentation Schema
Overview
Meaning of Financial
Services as per IFSC
Authority Act
Establishment of
Authority
Powers and Functions of
Authority
Finance, Accounts and
Audit
Powers of Central
Government
Miscellaneous
Provisions
Overview of Regulators
in other Financial
Centres
Way Forward

5. Overview

6. Introduction
Currently the banking, capital markets and insurance sectors in IFSC are regulated by multiple
regulators i.e. RBI, SEBI and IRDAI
The dynamic nature of business in the IFSCs necessitates a high degree of inter-regulatory
co-ordination
Hence a need was felt for having a unified financial regulator for IFSCs in India to provide
world class regulatory environment to financial market participants
Accordingly, the IFSC Authority Act was introduced on December 19th, 2019 after the
assent of the President
The Act shall apply to the IFSCs set up under SEZ Act, 2005

7. Objectives of the IFSC Authority Act, 2019
The main objective of the Act is to bring several regulators together as one unit and serve as a
single-window for regulating various financial activities in the IFSC
The unified regulator would provide world class regulatory environment to financial
market participants from an ease of doing business perspective
The unified Authority would also provide the much needed impetus to further
development of IFSC in India in-sync with the global best practices
This would also generate significant employment in the IFSCs in particular as well as financial
sector in India as a whole

8. Timeline
February 6th,
2019
• Union Cabinet approves the
introduction of IFSC Authority Bill
February
12th, 2019
• IFSC Authority Bill was introduced
in the Rajya Sabha
November
25th, 2019
• The Bill was introduced in the
Lok Sabha
December
11th , 2019
• The Bill was passed in the
Lok Sabha
December
19th, 2019
• The IFSC Authority Act
received the assent of
the President
Note: The Act received the assent of the
President but it shall come into force on
such date notified by the CG (not yet
notified)

9. Role of IFC’s Regulatory Law in an
Economy
The regulatory system is vital to the objectives of ensuring an efficient,
competitive and stable financial system while at the same time
providing protection for domestic consumers of financial products
sold
The IFCs have traditionally emerged around new technologies but it is
important that policy makers should concentrate on the financial laws
which underpins an IFC
A contingency-based view with the financial sector regulators actively
encouraging an IFC’s financial institutions to seek out providers of
funds to new technologies and facilitate the risk-adjusted value of
such flows along with serving macro prudential objectives
Also periodic reviews and reassessments of the regulatory framework
should be conducted in order to avoid excessive regulations on
financial services

10. Meaning of Financial Services under the IFSC
Authority Act
Financial services rendered by an unit set up in an IFSC shall be the following
1 Buying, selling or subscribing to a financial product or agreeing to do so
2 Acceptance of deposits
3 Safeguarding and administering assets consisting of financial products belonging to another person
4 Effecting Insurance contracts
5 Management of assets consisting of financial products belonging to another person
6 Exercising any right associated with a financial product or financial service
7 Establishing or operating an Investment scheme
8 Maintaining or transferring records of ownership of a financial product
9 Underwriting the issuance or subscription of a financial product
10 Providing information about a person’s financial standing or creditworthiness
11 Selling, providing or issuing stored value or payment instruments or providing payment services
12 Making arrangements for carrying on any of the services above
13 Rendering advice or soliciting for the purposes of buying/selling/subscribing to a financial product or
availing any services above or exercising any rights related to the same
14 Any other service as notified by the CG
Note: Every transaction of financial services in an IFSC shall be in such foreign currency as may be specified by
regulations in consultation with the CG

11. Overview of the Act
Establishment of Authority Incorporation of Authority
Composition of Authority
Term of Office and Conditions of service of members
Meetings and Proceedings of the Authority
Powers and Functions of the
Authority
Functions of the Authority
Powers of the Authority
Finance, Accounts and Audit Grants and IFSC Fund
Accounts and Audit
Performance Review Committee
Maintenance of Website, Returns and Reports
Powers of Central Government Power to supersede Authority
Power to modify provisions of other enactments relating to IFSC
Power to make Rules
Additional Powers
Miscellaneous Provisions Power to make Regulations
Additional Provisions

12. Establishment of Authority

13. Incorporation of Authority
The Authority shall have powers to enter into and execute contracts, acquire, hold and dispose movable
and immovable property, sue and be sued
The Authority shall be a Body Corporate having Perpetual Succession and Common Seal
And decide the place of Head Office of the Authority and approve the Authority to establish its offices at
other places in India or outside India
The CG may by notification establish an IFSC Authority

14. Composition of Authority
The CG may appoint persons having good capacity in dealing with matters related to financial sectors, as
members of the Authority
Two other members
appointed by the CG
on
recommendations
of a Selection
Committee*
Two ex-officio
members from
the Department
of Finance to be
nominated by
the CG
One ex-officio
member each to
be nominated by
the RBI, SEBI,
IRDAI and PFRDA
A Chairperson
Shall be a whole-time member and
have powers of general
superintendence and direction in
respect of all administrative matters Shall be whole-time or part-time members
*The Selection Committee shall be constituted by the Central Government
Note: The Authority may appoint such officers and other employees as it considers necessary for the
effective discharge of its functions and their terms of service shall be specified by the regulations

15. Terms of Office and Conditions of Service
of Members
Term of Office
Chairperson and a Member
Member
• Maximum age to hold office : 65
• Maximum age to be as whole-time
member : 62
Chairperson
• Hold office for a term of 3 years
• Eligible for re-appointment
• May resign from office by giving notice in
writing of not less than 3 months
Conditions of Service
Members other than ex-
officio members
• Salaries and allowances payable and other
terms of service shall be as prescribed
• Shall not accept employment under
CG/SG or any appointment in any financial
institution in IFSC for 2 years from the date
of cessation of holding office
Removal of a member
from Office
CG may remove a
member after giving
reasonable opportunity of
being heard if such
member :
• Is adjudged as insolvent
• Has become physically or mentally
incapable
• Has convicted an offence involving moral
turpitude
• Has acquired prejudicial financial interests
• Has abused his position

16. Meetings and Proceedings of the
Authority
The meetings of the Authority shall be conducted at such places and in
such procedure as specified by regulations
If the Chairperson is unable to attend the meeting, any Member chosen
by the Members present from amongst themselves shall preside at the
meeting
Decisions shall be taken with the majority of votes and in case of
equality the Chairperson (or the person presiding) shall have a casting
vote*
Members should disclose in writing of any interest likely to arise to
him/her on a matter which is to come up for consideration in the
meeting and shall not take part in the decision of the same
Vacancies or defects in the constitution or appointment of members of
the Authority shall not affect any act or proceedings of the Authority
* Casting vote is an extra vote given by a Chairperson to decide an issue when the votes on each side are equal

17. Powers and Functions of
Authority

18. Functions of Authority
• Regulation of financial products*, financial services and financial institutions in an IFSC which
have been permitted by any regulator (RBI, SEBI, IRDAI and PFRDA) before the commencement of
this Act
• Regulation of such other financial products, financial services and financial institutions in the IFSC
as notified by the CG
• Recommendation to the CG of such other financial products, financial services and financial
institutions which may be permitted in an IFSC
*Financial products means
1) Securities
2) Insurance Contracts
3) Deposits
4) Credit arrangements
5) Foreign currency contracts other than contracts to exchange one currency for another that are to be
settled immediately
6) Any other product or instrument as notified by the CG

19. Powers of the Authority
The Authority shall exercise all powers exercisable by the Appropriate Regulators in the IFSC under the
respective Acts as mentioned in the First Schedule of IFSC Authority Act
S.No. Appropriate
Regulator
Powers in the Relevant Acts
1 RBI 1) RBI Act, 1934
2) Banking Regulation Act, 1949
3) Deposit Insurance and Credit Guarantee Corporation Act, 1961
4) FEMA, 1999
5) CIS(Regulations) Act, 2005
6) Government Securities Act, 2006
7) The Payment and Settlement Systems Act, 2007
2 SEBI 1) Securities Contracts (Regulations) Act, 1956
2) SEBI Act, 1992
3) The Depositories Act, 1996
3 IRDAI 1) Insurance Act, 1938
2) General Insurance Business (Nationalisation) Act, 1972
3) IRDAI Act, 1999
4 PFRDA 1) PFRDA Act, 2013
Note: Amendment for any inclusion or omission of regulator and the relevant law can be made to the
above Schedule by the CG by notification after its laid before each House of Parliament

20. Contd…
The provisions of the relevant Acts (mentioned in the Schedule) applicable to financial products,
financial services and financial institutions shall apply under IFSC Authority Act for the same. Such
provisions include the following
Manner of
1) Filing an application for recognition or registration or withdrawal of recognition/registration
2) Furnishing of information or reports
Procedures of
1) Inspection, Investigation or Prosecution of Offences
2) Settlement of Proceedings
3) Compounding or Adjudication of any offence or penalty
4) Filing of appeals
Determination or settlement of
1) Any fee or any fine or penalty or any other sum of amount or punishment
Note:
 Penalties, fines, fees and settlement shall be realized in the foreign currency equivalent to INR as
notified by RBI
 All such sums realized shall be credited to the Consolidated Fund of India* in Indian rupees
* The Consolidated Fund of India consists credit of all tax and non-tax revenues received by the
Government and loans raised by the Government (internal and external debt)

21. Finance, Accounts and Audit

22. Grants and IFSC Fund
The CG may grant such sums of money as it may think it is necessary to the Authority after due appropriation is
made by the Parliament
IFSC Authority Fund
Amount to be credited to
the Fund
1) All grants, fees and charges received by the Authority
2) All sums received by the Authority from the sources as decided by the CG
Application of the Fund 1) Salaries, Allowances and other Remuneration of members, officers and
employees of the Authority
2) Other expenses incurred for the discharge of functions
Accounts and Audit
Proper Accounts and relevant records are to be maintained and an Annual Statement of Accounts shall be
prepared by the Authority
The accounts of the Authority shall be audited by the CAG of India and expenditure incurred in connection of such
audit shall be payable by the Authority to CAG
The CAG and any person appointed by him shall have all rights as exercisable in the audit of Government accounts
and right to demand production of books, accounts, connected vouchers, other documents and papers and right to
inspect any office of the Authority
The accounts certified by the CAG or such person appointed and the Audit Report shall be forwarded annually to
the CG and the same shall be laid before each Houses of the Parliament

23. Performance Review Committee
The Authority shall constitute a Performance Review Committee consisting of at least 2 members of the
Authority to review the functioning of the Authority on the following matters
1) Adherence to provisions of the applicable laws
2) Regulations made promote transparency and best practices of governance
3) Management of risks in a reasonable manner
The Authority shall forward a copy along with action
taken to the CG within 3 months from the date of
receipt of report
The report shall be submitted to the Authority
The Review shall be done at least once in every F.Y. The Committee shall maintain a system for a person
to submit on the incidence of following matters
Non-adherence of the provisions of any applicable
law
Misappropriation of resources
Abuse of powers
Non-compliance of any decision by any member or
employee of the Authority
The Authority shall provide with the adequate resources and make the necessary regulations to enable the
Committee to discharge its functions

24. Maintenance of Website, Returns and
Reports
A website or any universally accessible repository of electronic information of all regulations and orders
issued shall be maintained by the Authority
• The Authority shall review the quality of the website based on international best practices once every
year and publish the report with the findings along with the Annual Report
The Authority shall furnish to the CG all particulars relating to any proposed or existing programme for
development and regulation of the units in the IFSC as and when required
The Authority shall submit a Report on the account of activities, policies and programmes during the
previous F.Y. within 90 days from the end of F.Y.
A copy of the report shall be placed before each Houses of the Parliament

25. Powers of Central
Government

26. Power to Supersede Authority
The CG may supersede the Authority by notification ( after a reasonable opportunity to make representations is
given) for not more than 6 months on occurrence of the following
• The Authority is unable to discharge its functions due to circumstances beyond its control
• Deterioration of the Financial position or Administration of the Authority on account of persistent default
in discharge of its functions or duties
• Existence of circumstances which render it necessary in the public interest to do so
Effects of publication of notification for supersession
• The Chairperson and Members shall vacate their offices from the date of supersession
• All powers, duties and functions exercisable by the Authority shall be exercised by persons directed by the
CG (till reconstitution of Authority )
• All properties owned or controlled by the Authority shall vest with the CG (till reconstitution of Authority )
The CG shall reconstitute the Authority on expiry of supersession period with fresh appointment of Chairperson
and Members ( those who vacating office are eligible for reappointment)
Note: A copy of the notification issued and the report of actions taken shall be forwarded by the CG to be laid
before each Houses of the Parliament

27. Power to Modify Provisions of Other
Enactments relating to IFSC
The CG may direct that the provisions, rules, regulations, orders, notifications and directions issued under any
other Central Act shall/ shall not apply to financial products, financial services or financial institutions in an IFSC
Mode of Modification
The draft of a copy of every
notification proposed to be
issued is to be laid before
each House of Parliament
while it is in session
It is to be laid while it is in
session for 30 days (in
one/more successive
sessions)
If before expiry of session
both the Houses agree/
disagree with the
notification
The notification shall not be
issued or shall be issued in
the modified form as agreed
upon by both Houses only

28. Power to Make Rules
The CG may make rules for the following matters by notification
Composition and
Constitution of
Selection
Committee
Form of
maintenance of
Accounts,
Records and
Annual
statement of
Accounts
Salaries and
Allowances and
other Terms and
Conditions of
service of
Members
Form of Annual
Report of
activities, policies
and programmes
Functions to be
performed by
Authority
Any other matter
Form and
manner of
furnishing of
returns and
statements
Note: Every Rule made under this Act shall be laid before each Houses of the Parliament in the same
manner for modification of provisions of other enactments relating to IFSC (discussed earlier)

29. Additional Powers
CG may issue directions in writing to the Authority and the Authority
shall be bound by such directions on questions of policy after an
opportunity for expression of views is given
The CG may by an order in the Official Gazette make the necessary
provisions to remove any difficulty encountered in giving effect to the
provisions of the IFSC Authority Act*
* Any such order made shall be laid before each House of Parliament and no such order shall be made after
5 years from the commencement of this Act

30. Miscellaneous Provisions

31. Power to Make Regulations
The Authority may make regulations for the following matters by notification
Rules and
Procedure for
transaction of
business at
meetings
Maintenance of
website
Salaries and
Allowances of
officers and
other employees
of the Authority
Delegation of
powers and
functions
Manner of
performance of
functions of the
Authority
Foreign Currency
in which
transaction of
financial services
in IFSCs may be
conducted
Manner of
providing
information to
Performance
Review
Committee
Note: Every Regulation made under this Act shall be laid before each Houses of the Parliament in the same
manner for modification of provisions of other enactments relating to IFSC (discussed earlier)

32. Additional Provisions
The Authority may delegate to any Member or Officer or form Committees of Members for delegation of
powers and functions of the Authority by general or special order in writing ( Powers to make regulations
shall not be delegated)
The Members, Officers and Employees of the Authority shall be deemed to be public servants as
per Sec 21 of Indian Penal Code
No suit, prosecution or legal proceeding shall lie against the CG, the Authority or any of its
members, officers or employees for an action done in good faith under this Act
The Authority shall not be liable to any laws or enactments of taxation including Income Tax Act,
1961
The provisions of this Act shall have overriding effect over any other law

33. Overview of Regulators in
Other Financial Centres

34. Singapore
The Monetary Authority of Singapore (MAS) is the Central Bank of Singapore and is an
integrated supervisor overseeing all financial institutions in the country – banks, insurers, capital
market intermediaries, financial advisors and the stock exchange
MAS is responsible for the administration of the Banking Act, Insurance Act and the
Financial Advisers Act which provide for the regulation of financial services and markets in
Singapore
As to the specific financial regulation of different institutions, there are particular departments
inside the MAS supervising the business

35. Overview of Departments of MAS
Banking
Banking Department I supervises local banking groups and certain foreign banks
Banking Department II supervises mix of retail and wholesale banks, finance companies,
money changers and remittance agents
Banking Department III generally supervises banks active in treasury and private banking
businesses
Insurance Insurance Department supervises and regulates insurance companies
Capital Market
Capital Markets Intermediaries Department
Investment Intermediaries Department
Market Conduct Department
Markets Policy and Infrastructure Department
Policy, Risk and
Surveillance
Prudential Policy Department Formulates capital and prudential policies to promote a
dynamic financial sector
Specialist Risk Department Provides risk expertise for the effective prudential
supervision of Singapore’s financial sector
Macroeconomic Surveillance
Department
Conducts surveillance of the financial system to identify
emerging trends and potential vulnerabilities and closely
monitors developments in international financial markets

36. London
After the financial crisis of 2008, a new regulatory framework for the UK’s financial sector came into effect in
April, 2013
Since 2013, The Financial Service Authority (FSA) has become two separate regulatory authorities i.e. the
Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA)
The FCA regulates the financial service industry in the UK and is responsible for promoting effective
competition, ensuring that relevant markets function well and for the conduct regulation of all financial
services firms (FCA is a separate institution and not a part of the Bank of England)
The PRA was created by the Financial Services Act, 2012 and is part of the Bank of England and responsible
for the prudential regulation and supervision of banks , building societies, credit unions, insurers and major
investment firms

37. Hong Kong
Hong Kong’s banking sector comprises 3 tiers of authorized institutions
(AIs) namely Licensed Banks, Restricted License Banks and Deposit-taking
companies
The Hong Kong Monetary Authority (HKMA) ensures general stability and
effective working of the banking system through regulation of banking and
deposit-taking business and the supervision of AIs
The HKMA derives its regulatory powers from the “Banking Ordinance” and
adopts a continuous supervision policy to supervise banks
The Securities and Futures Commission (SFC) is the lead regulator for the
securities industry
To facilitate co-operation on supervising AIs’ securities business, the HKMA
and the SFC have entered into a MoU setting out their roles and
responsibilities

38. Australia
Australia’s regulatory system is an important area of comparative advantage, particularly in the wake of the global
financial crisis
Australia has three key regulators namely the Australian Prudential Regulation Authority (APRA), the Australian
Securities and Investment Commission (ASIC) and the Reserve Bank of Australia (RBA) with the responsibility for
the authorization and supervisions of banks, insurers and other financial institutions
APRA is the national prudential regulator of financial institutions in Australia under the APRA Act, 1998 in
accordance with the laws of the Commonwealth that provide for prudential regulation or retirement income
standards
APRA administers legislation providing for the supervision of authorized deposit-taking institutions, insurance/
reinsurance companies, friendly societies and superannuation funds licensed or registered by APRA
ASIC is the corporate, markets and financial services regulator responsible for promoting market integrity and
consumer protection
The RBA is Australia’s Central Bank and has a long-standing responsibility for the overall stability of the financial
system, monetary policy and payment systems

39. United States
• The structure of the regulatory regime for financial products and services in the United States (US)
is arguably the most complex of any jurisdiction due to a variety of factors including historical
precedent, the federalist nature of the US and national politics
• The federal banking supervisors include the Board of Governors of the Federal Reserve System
(the Federal Reserve), the Office of the Comptroller of the Currency (OCC), the Federal Deposit
Insurance Corporation (FDIC)
• Financial products and services, financial markets and certain participants in those markets are
regulated by the financial markets regulators which include the Securities and Exchange
Commission (SEC) and the Commodity Futures Trading Commission (CFTC)
• The Consumer Financial Protection Bureau (CFPB) was formed in 2010 to focus on consumer
protection with regard to financial products and services.

40. Way Forward
Countries such as Australia whose financial sectors and regulatory systems have emerged from the
crisis in relatively good shape are now at a competitive advantage
The initiative to develop a unified regulatory system for IFSCs in India is great move which will
avoid regulatory overlap
However, the framework should be keen to deploy mechanisms to inspect supervision
loopholes and identify internal communication disorders
The integrated financial regulator will provide a stimulus for further development of IFSCs in India
and enable bringing back of financial services and transactions that are currently carried out in
offshore financial centres outside India

41. Thank You!
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