Reserve Bank Deputy Governor R Gandhi today made it clear that domestic banks setting up shops at the International Financial Services Centre (IFSC) here must adhere to anti-money laundering norms and refrain from doing cash transactions.
He was speaking at the conference on 'Regulatory Framework for IFSC' after the launch of the country's first IFSC at the GIFT City here.
While describing the rules and regulations for domestic banks intending to set up IFSC Banking Units (IBUs) at the centre, Gandhi said such facilities will be governed by the norms laid by RBI.
"The IBUs will be required to scrupulously follow instructions issued by the RBI on combating of financial terrorism (CFT) and other anti-money laundering measures. IBUs are prohibited from undertaking cash transactions. It has to be based on account transfers."
On April 1, the RBI had issued relaxed norms for setting banking up units in the IFSC by relaxing the mandatory reserve requirements for domestic and foreign banks.
The banking units within the IFSC will be able to transact with non-resident entities, other than individual, retail customers, or HNIs, while all transactions of IBUs would need be done in non-rupee currencies, the RBI had said.
Issuing operational guidelines, RBI said "IBUs will be exempted from liabilities of both cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements. The parent bank will be required to provide a minimum capital of USD 20 million or equivalent in any foreign currency to its IBU."
RBI further said only those foreign banks which are present in India would be allowed to set up unit at IFSC.
"Each of the eligible banks would be permitted to establish only one IBU in each IFSC. For most regulatory purposes, an IBU will be treated on par with a foreign branch of an Indian bank," RBI said in a notification.
While IBUs can raise funds, including borrowing in foreign currency, from non-residents, deployment of funds can be for both residents as well as non-residents.
Gandhi said all transactions of IBUs should be in any foreign currency. "In addition, IBUs are not allowed to open any current or savings accounts. They cannot issue bearer instruments or cheques. All payment transactions must be undertaken via bank transfers."
Further, he said banks interested in setting up IBUs will be required to obtain permission from RBI.
On the issue of minimum requirement of capital, Gandhi said the parent bank will be required to provide a minimum capital of USD 20 million or equivalent in any foreign exchange currency to its IBU.
