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The International Financial Services Centres Authority issues amendments and additions to the IFSCA Banking Handbook based on feedback from Banking Units and to give effect to amendments to the IFSCA (Banking) Regulations, 2020. Banking Units must ensure compliance with the updated General, Conduct of Business, and Prudential directions. The updated directions take effect immediately on the date of this circular.
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International Financial Services Centres Authority
F.No.110/IFSCA/Banking Regulation/2023-24/1
July 10, 2023
To,
All Banking Units
Dear Sir/Madam,
Amendments and additions to the IFSCA Banking Handbook
Based on the feedback received from IBUs and to give effect to amendments to the IFSCA (Banking) Regulations, 2020 certain further amendments/additions have been carried out to the contents of the Handbook. The list of such amendments/additions is enclosed in the annexure to this circular.
The abovementioned amendments/additions shall be effective from the date of this circular.
With effect from the date of this circular the applicable Banking Handbooks are : :
Yours faithfully
(Supriyo Bhattacharjee)
Chief General Manager
Department of Banking Regulation and Development
Annexure
| GENERAL DIRECTIONS | ||||
|---|---|---|---|---|
| No. | Module no. | Module Name | Section | Amendment/addition |
| 1 | Interpretation | 1 | New para added clarifying the requirement of Statutory Audit under laws applicable to the IBUs | |
| 2 | 2 | Governance Directions (GOV) | 2(4) Definitions | The term "Internal controls and assurance function" replaced by "Internal controls and assurance framework" for uniformity with rest of the document. |
| 3 | 2 | Governance Directions (GOV) | 4(1) Principles of Governance | Sub paras (d) and (e) added to the sub-section on "Role of Governing Body" |
| 4 | 5 | Systems and Controls (SYSCO) | 3 Outsourcing | In subsection (i), Responsibility for compliance, new para "aa" inserted and existing para "b" amended |
| 5 | 5 | Systems and Controls (SYSCO) | 3 Outsourcing | In subsection (iv), Notification of Authority of material outsourcing arrangements, existing para "a" amended |
| 6 | 5 | Systems and Controls (SYSCO) | 3 Outsourcing | In subsection (v), Material outsourcing arrangements, sub para (a) amended. |
| 7 | 5 | Systems and Controls (SYSCO) | 3 Outsourcing | New subsections (viii) Maintenance of records" and (ix) "Audit requirements" added |
| CONDUCT OF BUSINESS DIRECTIONS | ||||
|---|---|---|---|---|
| No. | Module No. | Module Name | Section/ Module | Amendment/addition |
| 8 | 1 | Activities of Banking Units (ACBU) | 2 Definitions | Definition of " Specified foreign currencies" inserted as clause (iv)(a). |
| 9 | 1 | Activities of Banking Units (ACBU) | 4 Permitted activities | Name of the subsection (ii) changed to "Borrowing from and lending to" and the contents of the section amended. |
| 10 | 1 | Activities of Banking Units (ACBU) | 4 Permitted activities | Para (b) of subsection (xi) "Acting as a portfolio manager", amended |
| 11 | 1 | Activities of Banking Units (ACBU) | 4 Permitted activities | Para (b) of subsection (xii) "Providing Investment Advisory service", amended. |
| 12 | 1 | Activities of Banking Units (ACBU) | 4 Permitted activities | In subsection (xix) ("Undertaking foreign exchange transactions") reference to "freely convertible currencies" replaced with "specified foreign currencies". |
| 13 | 1 | Activities of Banking Units (ACBU) | 4 Permitted activities | The following subsections inserted : (xxix) "Distribution of capital market products" (xxx) "Participating in an authorised payment system" (xxxi) "Offering payment services" |
| 14 | 1 | Activities of Banking Units (ACBU) | 6 Compliance with AML standards and CFT guidelines | Contents of the section amended to replace reference to RBI KYC guidelines with IFSCA KYC Guidelines . |
| 15 | 2 | Undertaking Business in Foreign currency (BIFC) | 3 Permissible business in foreign currency | Reference to "freely convertible currencies" replaced with "specified foreign currencies" in sub-sections (a), (b), (c) and (g). |
| 16 | 2 | Undertaking Business in Foreign currency (BIFC) | 6 Nostro account in Indian Rupee (INR) | New section on " Nostro account in Indian Rupee (INR)" added |
| 17 | 3 | Client classification (CLIC) | 2 Client classification | In sub-section (i) "Obligation to classify clients", existing para (a) amended and a new para (b) inserted |
| 18 | 11 | Accepting Deposits (ACDE) | 3,6 and 7 Permissible Deposits, Certificate of Deposit , Maintenance of RDRR | Reference to "freely convertible currencies" replaced with "specified foreign currencies" sub-sections 3(i), 3(ii), 3(iii), 6(i), 6(ii) and 7(i). |
| 19 | 11 | Accepting Deposits (ACDE) | 4 Interest rate framework and other requirements | Sub-section (viii) has been amended to specify that Individual clients classified as "professional" may be permitted to be offered deposits without premature withdrawal facility. |
| 20 | 12 | Representative Office (REPO) | 9 Adherence to AML standards and CFT guidelines | Content of the section has been amended to replace reference to RBI KYC guidelines with IFSCA KYC Guidelines |
| 21 | 13 | OTC Derivatives (OTDE) | 3 Participants | Section 3(iv)(b) updated to specify that persons resident in India shall be treated as clients only if IBUs are specifically permitted to offer OTC derivatives to them |
| 22 | 13 | OTC Derivatives (OTDE) | 5 Products | Subsection (iii) added to specify that market makers shall not offer OTC derivatives to persons resident in India unless specifically permitted. |
| 23 | 13 | OTC Derivatives (OTDE) | 6 Suitability obligations of market makers | Subsection (viii) added to require IBUs to exercise due care to ensure that products offered by them are not being used to circumvent or violate laws or regulations pertaining to investments into India by persons resident outside India. |
| 24 | 13 | OTC Derivatives (OTDE) | 9 Exchange of Margin | Reference to "freely convertible currencies" replaced with "specified foreign currencies" in sub-sections iv(a) and iv(b). |
| 25 | 13 | OTC Derivatives (OTDE) | 15 Substituted compliance | The term "cross-border", while referring to derivative transactions eligible for substituted compliance in subsections (i) and (ii) , deleted. |
| 26 | 13 | OTC Derivatives (OTDE) | Annex 2 | Subsection (c) (ODIs on securities) inserted to permit ODI on "securities" as listed u/s section 2(h)(i) of the Securities Contract (Regulation) Act, 1956 (as amended) 1 |
| 27 | 13 | OTC Derivatives (OTDE) | Annex 6 | Correction in para (a) to remove reference to ISDA while reference to WGMR and added footnote about formation of WGMR |
| 28 | 13 | OTC Derivatives (OTDE) | Annex 7 | List of specified derivatives updated on account of discontinuance of derivatives linked to LIBOR and addition of derivatives linked to new benchmark rates like Euro Short Term Rate (€ STR) and Fed Secured Overnight Financing Rate (SOFR) |
| 29 | 15 | Referral Services (REFRS) | 1 Application | Definition of Referral Services updated to align with the definition of the term in the IFSCA (Banking) Regulation, 2020 (as amended). |
| 30 | 16 | Providing Credit (PRCR) | 3 General conditions on providing credit | Reference to "freely convertible currencies" replaced with "specified foreign currencies" sub-section (i). |
| 31 | 16 | Providing Credit (PRCR) | 3 General conditions on providing credit | Requirement for compliance with the "Guidance framework on sustainable and sustainability linked lending by financial institutions" dated April 26, 2022" inserted as subsection (v) |
| 32 | 17 | Global Administrative Office (GAO) | 10 Adherence to AML standards and CFT guidelines | New section 10 inserted to mandate compliance with the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022. |
| 33 | 18 | Providing services to designated entities without risk participation (PRSE) | New module | New module on "Providing services to designated entities without risk participation" inserted as Module 18 |
