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

Orchid Finance, a registered finance company in GIFT IFSC, proposes to denominate its loan to a group company's overseas subsidiary in Indian rupees, as it would for a domestic NBFC. Under the general framework for IFSC units, what is the correct view?

The general rule is that IFSC units conduct financial services in freely convertible foreign currency, not rupees. Because the IFSC is treated like an offshore financial centre, rupee-denominated lending is not the default, so the proposal to mirror a domestic NBFC is incorrect.

  1. ARupee denomination is the norm because the IFSC is in India
  2. BRupee and foreign currency are equally the norm
  3. CFinancial services in an IFSC are generally to be carried out in freely convertible foreign currency, so rupee denomination is not the defaultCorrect
  4. DCurrency is irrelevant to IFSCA regulation

Explanation

IFSCs are treated as offshore-like jurisdictions for financial services, and business is generally conducted in specified foreign currency. Treating the IFSC unit like a domestic NBFC and using rupees is therefore not the default position.

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