The International Financial Services Centres Authority (IFSCA) on Wednesday allowed Banking Units (BUs) to transfer assets to/from other financial institutions, persons resident in India and persons resident outside India through any internationally recognised standard risk participation agreement. The above dispensation is expected to encourage risk participation of foreign currency assets through BUs in IFSC instead of banks in foreign jurisdictions, IFSCA said in a statement.
The first IFSC in the country has been set up at the Gujarat International Finance Tec-City (GIFT) in Gandhinagar. Transfer of assets through the risk participation agreement route is a common practice in many jurisdictions especially in the field of trade finance, it said.
"Such risk participation is undertaken as a bilateral contract under a standard document called a risk participation agreement between the two institutions (buying and selling entity). One of the common standard risk participation agreement is the Master Risk Participation Agreement (MRPA) developed by the Bankers Association for Finance and Trade (BAFT)," it said.
The IFSCA was established on April 27 this year with its head office in Gandhinagar. In December 2019, Parliament passed a bill to set up a unified authority for regulating all financial activities at IFSCs in the country.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today