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

Kaveri Bank's IBU in GIFT City plans to lend to a resident Indian company's domestic rupee project. A compliance officer must decide the correct position. What is it?

Domestic rupee lending to a resident company lies outside an IBU's licensed scope. IBUs operate as offshore-type units serving permitted IFSC business mainly in foreign currency, so a board resolution or collateral cannot extend the activity beyond what the IFSCA licence allows.

  1. AThe IBU may freely lend rupees to any Indian resident without any restriction
  2. BThe IBU is meant to serve non-residents and specified IFSC-permitted business, so purely domestic rupee lending falls outside its licensed scopeCorrect
  3. CThe IBU may lend rupees provided the parent bank's board passes a resolution
  4. DThe IBU may do so if the borrower deposits collateral in an IFSC account

Explanation

IBUs operate in the IFSC as an offshore-type jurisdiction for permitted foreign currency business. Domestic rupee lending is not their licensed scope; a board resolution or collateral cannot widen the licence.

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