RBI Governor Urjit Patel on Wednesday made a case for setting up a unified regulator and a world-class legal framework for International Financial Services Centres (IFSCs) to expeditiously deal with dispute resolution and other issues.
Speaking at the Vibrant Gujarat Global Summit, Patel said a high-level working group needs to be set up to look into the existing laws governing financial contracts in India.
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Based on the review, a world-class legal framework for financial contracts in GIFT could be enabled, either by appropriately amending the existing laws governing financial contracts or enacting a fresh law, he said.
GIFT (Gujarat International Finance Tec-City) has been set up by the state government as India's first IFSC that brings together world class infrastructure, connectivity, people and technology on a single platform for businesses across the world.
IFSC at GIFT City is probably the first such centre to be launched after the 2008 global financial crisis. An IFSC should have a legal structure that is sufficiently supportive of the swift resolution of conflicts and disputes arising from the settlement or enforcement of complex international financial contracts, Patel said.
The contract should be of international standard and enforceable in the court of law and preferably similar to ISDA documentation, he noted.
While individual regulators can supervise the entities initially when the size of the business is small, a unified regulator would be necessary to pay undivided attention to the IFSC, he said.
In addition, he said, a unified financial regulatory framework providing for a single regulator for GIFT City could contribute to better regulation and supervision of the financial entities in the City. Work on the design of such a framework should begin soon so as to be able to implement this in time, he added.