January 2020 
             
             
            What’s New 
               News Flash 
             
      
          RBI relaxes operating framework for IBUs in IFSC                                                                                                                                 
                                                                                                                                                                                           
                                                                                                                                                                                           
                                                                                                                                                                              1            
          The Reserve Bank of India (RBI) had issued guidelines for setting up IFSC Banking Units (IBUs) through a circular  dated 
          1 April 2015. These guidelines prescribe various operating conditions for the IBUs, such as source of funding, permitted 
          banking activities, capital adequacy requirements, prudential norms, etc. Considering various stakeholder representations, 
          the RBI has periodically reviewed and revised these guidelines. 
           
          With reference to the recent policy announcements made in the Fifth Bi-Monthly Monetary Policy Statement 2019-20 dated 
                                                                               2
          5 December 2019, the RBI has issued a circular  dated 23 December 2019 amending the existent IFSC Banking Unit 
          Guidelines as follows: 
          •     Previously, the RBI allowed IBUs to raise liabilities, including borrowing in foreign currency, only with original maturity 
                periods greater than one year. The RBI has now allowed IBUs to raise liabilities without any restrictions on the maturity 
                period. 
          •     The RBI had earlier permitted IBUs to open foreign currency current accounts (FCC accounts) of units operating in 
                IFSC, and non-resident institutional investors to facilitate their investment transactions. The RBI has now allowed IBUs 
                to open FCC accounts (including escrow accounts) of their corporate borrowers subject to the provisions of Foreign 
                Exchange and Management Act,1999 and the regulations issued thereunder. 
          •     The RBI had earlier prescribed that fixed deposits accepted from non-banks by the IBUs cannot be repaid prematurely 
                within the first year, except in certain circumstances. The RBI has now permitted IBUs to accept fixed deposits in 
                foreign currency of tenure less than one year from non-bank entities and repay prematurely without any time 
                restrictions. 
          •     In addition to the Know Your Customer, Combating the Financing of Terrorism and Anti Money Laundering provisions, 
                IBUs are now also required to comply with the reporting requirements, as maybe prescribed by the RBI/ other agencies 
                in India from time-to-time.  
          This is a welcome announcement by the RBI in response to the various representations made by the industry 
          representatives. These relaxations will promote ease of doing business for banking players in the IFSC. 
           
          1
            RBI circular DBR.IBD.BC.14570/ 23.13.004/2014-15 dated 1 April 2015 
          2
            RBI circular DOR.IBD.BC.26/23.13.004/2019-20 dated 23 December 2019 
           
                                                                                                                                                                                           
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          With Best Regards  
          PwC TRS Team 
                                                                                                                                                                                           
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