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Market regulator SEBI has allowed mutual fund houses and alternative investment funds (AIFs) to set up shop in international financial service centres (IFSCs) that may come up in various parts of the country.
An asset management company of a mutual fund operating in a IFSC should have a minimum networth of "not less than $ 2 million", SEBI said in its guidelines on IFSCs released on Friday.
This networth has to be ramped up to $10 million within three years of commencement of business in IFSCs, SEBI has stipulated.
It has also mandated that the mutual funds and AIFs operating in IFSCs can accept money from eligible investors only in foreign currency.
International Financial Services Centre (IFSC) are dedicated enclaves — special economic zones for financial services where several regulations have been relaxed to facilitate increased financial service activities.
GIFT City in Gujarat will most likely be the first IFSC that would take off under the new framework put in place by SEBI. Already National Stock Exchange and Bombay Stock Exchange — the country's largest bourses — have evinced interest in setting up international bourses in the GIFT City.
Under the SEBI guidelines for IFSCs, Indian firms can now raise capital in foreign currency in an IFSC. Similarily, companies of foreign jurisdiction could also raise capital in a currency other than Indian rupee in an IFSC.
An AIF (say private equity or a hedge fund) or a mutual fund operating in IFSC would be permitted to invest in securities which are listed in IFSC, securities issued by companies incorporated in IFSC and securities issued by companies belonging to foreign jurisdiction.
For the AIFs and mutual funds, SEBI will in due course specify the requirements regarding raising of funds in foreign currency such as minimum investment amount, minimum corpus of fund, disclosures, investment conditions, valuation and professional qualifications.
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