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

Orion Bank's IBU in GIFT City wants to raise foreign currency deposits and lend to a non-resident company's Indian-owned subsidiary abroad. Which feature of the IFSC treatment makes this IBU business distinct from domestic banking?

The distinctive feature is that the IBU is treated as a person resident outside India for its IFSC transactions under foreign exchange law and deals in foreign currency. It is not confined to resident individuals or barred from foreign currency dealing.

  1. AIt is treated as a non-resident for foreign exchange purposes, transacting in foreign currencyCorrect
  2. BIt is subject to cash reserve rules identical to domestic branches in rupee terms
  3. CIt must lend only to resident individuals
  4. DIt is barred from dealing in any foreign currency

Explanation

Under FEMA, a unit in the IFSC is treated as a person resident outside India for its IFSC transactions, and it deals in foreign currency. Domestic rupee reserve rules and resident-only lending do not define IBU business, and foreign currency dealing is its core.

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