Treasury arm of finance firms can invest in global assets through IFSC
A financial firm’s treasury will be free to undertake virtually any activity in recognised stock exchanges globally from the International Financial Services Centre (IFSC), norms released by its authority showed on Friday.
Only in specified cases, prior approval has to be taken, but the whole idea of the location being an free international finance centre would be protected, showed the details.
A global or regional corporate treasury centre, after being granted registration, will be permitted to carry transactions, including investing the funds of the group entities in bank deposits globally, inter-company deposits in multi-currency cash pooling, global bonds, run virtual accounts, etc.
The treasury can run structured finance transactions, undertake foreign exchange transactions, even invest in stocks shares of any entity listed on recognised stock.
The treasury can be used to raise credit facilities equity for group entities from the global markets, something that the companies are not able to do directly now.
The treasury centre will have to do the transactions in “freely convertible foreign currency only,” the IFSC Authority said. However, they will be allowed to defray their administrative expenses in rupees.
If the transaction is done in a non-freely convertible currency because of trade reasons, “such trade flow should be specifically identified against the transaction in a non-freely convertible currency which will be settled in freely convertible currency.”
The treasury will be allowed to undertake deals in foreign currency-rupee derivatives ”only where the foreign currency leg is in a freely convertible currency,” the norms said.
USD-INR derivatives can be undertaken with banks in India in line with the guidelines of the RBI on offshore entities hedging the local currency exposure.
The guidelines in dealing with non-deliverable forwards (including rupee or other currencies) would still be governed by the RBI other relevant guidelines already in force.
All financial information has to be submitted to the authorities denominated in US dollars. The entities will have to submit a performance report to the authorities within 90 days of finalising annual accounts.