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“Opening Doors: IFSC Relaxation Expected to Increase Foreign Stock Trading at GIFT City

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May 13, 2023

New prospects for trading foreign equities at GIFT City have emerged as a result of the Reserve Bank of India’s (RBI) recent decision to loosen limitations on banks operating in the International Financial Services Centre (IFSC). The action by the RBI lifts restrictions on people opening interest-earning FCAs at IFSCs and makes it simpler to repatriate idle funds from foreign currency accounts (FCA).

This move is anticipated to motivate Indian residents to participate in the stocks and securities of foreign companies that are offered at IFSCs. Prior to now, GIFT City’s ability to trade overseas stocks was constrained by the short 15-day term and FCA limitations. But after the most recent changes, GIFT City is now on par with other international authorities.

The RBI’s decision is in line with the announcement made in February 2021 permitting residents to transfer money to IFSCs via the Liberalised Remittance Scheme (LRS). Reverting to the 180-day norm for repatriating unused foreign currency to domestic INR accounts, the former need of returning cash within 15 days has been abolished.

The unsponsored depositary receipt (DR) program, which has already been introduced by the NSE IFSC, enables investors to purchase top US-based equities. Lower investment sizes are made possible by the ability to trade in fractional quantities or values. Investors can use their LRS limits to use IFSCs to buy foreign equities.

These easings are advantageous for both private investors and banks looking to mobilize liabilities at IFSCs. Banks may lend at more affordable rates thanks to easier access to capital, which eventually spurs economic expansion.

Overall, the RBI’s IFSC rules have been loosened, opening up new opportunities for foreign stock trading at GIFT City, luring investors, and establishing GIFT City as a viable global financial hub.


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