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There is a new opportunity for financial intermediaries in GIFT city.
In the budget memorandum, the government has proposed the introduction of retail funds and ETFs in Indian Finance Services Centre at GIFT city.
Retail funds and ETFs will open door for NRIs and foreign investors to invest in India with the reduced ticket size through GIFT city route. Currently, investors must invest a minimum of USD 1.50 lakh or Rs.1.25 crore (at current rates).
With retail funds and ETFs at GIFT City, fund houses can offer mutual funds and FoFs with any minimum ticket size.
A senior MF official working at IFSC feels that the minimum ticket size will largely depend on the target markets. Since there is no capping, retail funds can be available with as low as $500. He also pointed out that retail funds will give access to retail NRIs residing in prohibited countries as per Financial Action Task Force (FATF).
FATF is the global money laundering and terrorist financing watchdog. It sets international standards that aim to prevent these illegal activities and the harm they cause to society.
Akhil Chaturvedi, Chief Business Officer, Motilal Oswal MF said that the retail funds and ETFs can help MFDs and wealth managers to cater to retail and mass affluent NRIs, which was not possible so far due to higher ticket size.
MFDs can distribute AIFs available in GIFT city by empanelling with fund houses active in IFSC. Please note that they will have to do a different empanelment for GIFT city.
Key benefits of GIFT City
Products and services offered in GIFT City are exempted from domestic laws; instead, GIFT City follows international practices. Simply put, investors need not pay any tax in India; however, they will have to pay taxes in their respective geographies.
If you have clients from Dubai and Singapore, they will not be required to pay any taxes on these investments.
Another key benefit to investing through GIFT city is dealing with a single regulator for all financial products. All financial products in IFSC – mutual funds, stocks, PMS, AIFs, insurance and pension are regulated by a single regulator – International Financial Services Centres Authority (IFSCA).
