The International Financial Services Centres Authority Act, 2019

Summary of the International Financial Services Centres Authority Act, 2019
Overview
*Title: The International Financial Services Centres Authority Act, 2019 *Act No: 50 of 2019 *Purpose: Establishes a unified regulatory authority for International Financial Services Centres (IFSCs) in India, overseeing financial products, services, and institutions within these zones.
Key Provisions
1. Authority Establishment
• Name: International Financial Services Centres Authority
• Structure: Body Corporate with a Chairperson, members from key financial regulators (RBI, SEBI, IRDAI, PFRDA), and Central Government nominees.
2. Regulatory Scope
• Jurisdiction: Exclusive regulation of financial products, services, and institutions in IFSCs.
• Powers:
• Regulate and develop IFSCs.
• Exercise powers of RBI, SEBI, IRDAI, and PFRDA within IFSCs as specified.
• Recommend new financial products/services to the Central Government.
3. Amendments to Existing Legislation
• Affected Acts: Multiple, including the Payment and Settlement Systems Act, 2007, and the Pension Fund Regulatory and Development Authority Act, 2013.
• Amendment Nature: Exempts IFSCs from the regulatory ambit of the amended acts, placing them under the International Financial Services Centres Authority.
4. Operational and Governance Provisions
• Reporting: Annual reports to the Central Government, to be laid before Parliament.
• Rule Making: Empowers the Central Government and the Authority to make rules.
• Immunity and Protection: For actions taken in good faith under the Act.

Legislative History:

The International Financial Services Centres Authority Act, 2019

● Act Title - The International Financial Services Centres Authority Act, 2019

● Act Number / Year - 50 of 2019

● Act ID (India Code) - 201950

● Assent Date - December 19, 2019

● Enforcement Date - April 27, 2020

● Nodal Ministry - Ministry of Finance

Precedent & Historical Rationale

● Multiplicity of Regulators and Jurisdictional Bottlenecks in IFSCs - Under Section 18 of the Special Economic Zones Act, 2005, the establishment of India's first International Financial Services Centre (GIFT-IFSC in Gandhinagar) was permitted. However, entities operating within the IFSC were governed separately by four distinct domestic regulators: the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory and Development Authority (PFRDA), resulting in regulatory overlaps, friction, and compliance delays.

● Unified Statutory Architecture for Global Competitiveness - Formulated to establish a unified financial regulator to develop and regulate financial products, services, and institutions across International Financial Services Centres in India. The Act created the International Financial Services Centres Authority (IFSCA) as a single-window statutory regulator consolidating all regulatory, supervisory, and enforcement powers of the RBI, SEBI, IRDAI, and PFRDA within IFSCs, benchmarking the regime against premier global offshore financial hubs.

Parliamentary Trajectory & Enactment

● Formulation & Initial Introduction - Drafted by the Ministry of Finance (Department of Economic Affairs); initially introduced in the Rajya Sabha on February 12, 2019, during the 16th Lok Sabha, but subsequently withdrawn to incorporate stakeholder inputs and re-introduced in the 17th Lok Sabha.

● Parliamentary Passage - Re-introduced as The International Financial Services Centres Authority Bill, 2019 (Bill No. 343 of 2019) by Finance Minister Nirmala Sitharaman in the Lok Sabha on November 25, 2019, debated and passed by the Lok Sabha on December 11, 2019, and passed by the Rajya Sabha on December 12, 2019.

● President's Assent - Received the assent of the President of India (Ram Nath Kovind) on December 19, 2019, and was published in the Gazette of India on December 20, 2019.

● Enforcement - Enforced on April 27, 2020

Sources - Parliamentary Debates (Lok Sabha & Rajya Sabha), The Gazette of India, India Code, and Ministry of Finance.