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CS Professional · IFSCA - Regulations, Listing and Compliances · Banking Services and Finance Companies in IFSC

An IBU of an Indian bank in GIFT City proposes to lend and accept deposits mainly in rupees from resident Indian retail customers. Which view is correct under the IFSC banking framework?

The proposal does not fit IBU business. An IFSC Banking Unit is meant to transact mainly in foreign currency with eligible customers, treated like an offshore unit. Rupee retail banking with residents belongs to the parent bank's domestic operations outside the IFSC.

  1. APermitted, since the IBU is part of an Indian bank
  2. BPermitted only if deposits are below a limit set by the parent bank
  3. CNot the intended business; an IBU conducts permitted business primarily in foreign currency, not ordinary domestic rupee retail bankingCorrect
  4. DPermitted if the IBU takes approval from the local police

Explanation

IBUs are designed as an offshore-like unit dealing in foreign currency with non-residents and eligible persons. Ordinary domestic rupee retail banking with residents belongs to the parent bank's DTA operations, so the proposal is not an IBU activity.

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