IFSCA in talks with overseas regulators

Seeks to help Indian start-ups access foreign capital

The International Financial Services Centres Authority (IFSCA) is in talks with 10 foreign jurisdictions, with respect to bilateral agreements for enabling Indian fintech start-ups to expand globally and access foreign capital.

The IFSCA oversees the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC). And its latest effort is in line with the government’s ambitious plan to set up a world-class fintech hub at the Gujarat International Finance Tec-city (GIFT) IFSC in Gandhinagar, Gujarat.

“We have started the preliminary activities to develop a unique platform for fintechs. Essentially, we are looking to create a “fintech bridge” with 10 identified foreign counterparts that will facilitate Indian fintech to access foreign markets,” Injeti Srinivas, chairman, IFSCA, told Business Standard. He said that IFSCA has held discussions with financial regulators of these jurisdictions to see how this could be mutually beneficial.

According to Srinivas, a majority of about 2,500 fintech companies in India across all the segments are interested in an international presence. “This bridge will also facilitate cross references for both domestic and foreign fintechs and help them integrate not just capital, but also infrastructure,” he added.

The IFSCA also plans to set up a variable capital company (VCC) for managing funds in the IFSC. A committee headed by former bureaucrat, KP Krishnan, is working on a report which will be submitted soon.

Siddharth Shah, partner, Khaitan & Co, and an expert on regulatory matters, said, “An initiative like this will go a long way in scaling up the startup ecosystem in the country, owing to the leverage they would get with global connectivity.”

Shah points out that a lot of Indian startups have been setting themselves up offshore to tap overseas capital as well as access global markets. A fintech hub in Gift City with global access would ensure that they stay in India for they would get all the benefits that they look for abroad.

It could be the perfect solution for ‘onshoring the offshore’ and also facilitate the cross-flow of knowledge, intellectual property (IP) and capital, thereby integrating Indian start-ups with global ones and enhancing the whole ecosystem, Shah added.

Meanwhile, IFSCA is also mulling a joint regulatory sandbox with cross-border payments with other regulators, including the

RBI and some financial institutions. A regulatory sandbox refers to the live-testing of new products or services in a controlled regulatory environment where regulators may permit certain relaxations for the limited purpose of tests.

However, industry experts feel that the location of the fintech hub — Gujarat — could be a damper as most startups are based in Mumbai or Bengaluru.