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IFSCA Allows FPIs to Issue Derivatives with Indian Securities

Published on May 07, 2024
Current Context: The International Financial Services Centres Authority (IFSCA) has indeed permitted Foreign Portfolio Investors (FPIs) to issue derivative instruments with Indian securities.
IFSCA Allows FPIs to Issue Derivatives with Indian Securities
  • This decision was announced in a circular (IFSCA/CMD-DMIIT/NBE-DI/2024-25/001) dated May 02, 2024.
  • The move comes after the Union Minister of Finance and Corporate Affairs of India announced in the Budget Speech of 2023-24 that Offshore Derivative Instruments (ODIs) issued in GIFT-IFSC would be recognized as valid contracts.
  • Following this, Section 18A of the Securities Contracts (Regulation) Act, 1956 was amended to recognize contracts in derivatives, regulated by IFSCA and issued in IFSC by FPIs, as legal and valid.
  • Initially, the authority had permitted IFSC Banking Units, registered with SEBI as FPIs, to issue Derivative Instruments with Indian securities as underlying, in GIFT-IFSC.
  • Now, in the second phase, IFSCA has decided to permit non-bank entities, registered with SEBI as FPIs, to issue Derivative Instruments with Indian securities as underlying, in GIFT-IFSC.

Question:

Q.1 What is the name of the authority that permitted Foreign Portfolio Investors (FPIs) to issue derivative instruments with Indian securities?
a. Securities and Exchange Board of India (SEBI)
b. Reserve Bank of India (RBI)
c. International Financial Services Centres Authority (IFSCA)
d. Ministry of Finance, India
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