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Context

• IFSCA announced the Winners of Hackathon “Sprint01: BankTech” under I-Sprint’21.

 

Details

• International Financial Services Centres Authority (IFSCA), in its endeavour to support a World Class FinTech Hub at GIFT IFSC, had launched I-Sprint’21, the global FinTech Hackathon as part of InFinity Forum 2021.
• InFinity Forum is IFSCA’s flagship financial technology event, uniting the world’s leading minds in policy, business and technology to explore and advance the biggest ideas in FinTech and to develop those ideas into global solutions and opportunities.

 

DECODING IFSC, IFSCA, FIN TECH HUB, FINTECH HACKATHON, INFINITY FORUM, I-SPRINT’21 AND SAND BOX

What is an IFSC?

• An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders.
• London, New York and Singapore can be counted as global financial centres. Many emerging IFSCs around the world, such as Shanghai and Dubai, are aspiring to play a global role in the years to come.
• An expert panel headed by former World Bank economist Percy Mistry submitted a report on making Mumbai an international financial centre in 2007. However, the global financial crisis that unfolded in 2008 made countries including India cautious about rapidly opening up their financial sectors.
• In the Union Budget 2015 it was declared that India's first IFSC's would be set up in GIFT City in Gujarat.
• Gujarat International Finance Tec-City (GIFT City) is the country's first IFSC.

 

Can an IFSC be set up in a special economic zone (SEZ)?

• The SEZ Act 2005 allows setting up an IFSC in an SEZ or as an SEZ after approval from the central government.

 

What are the services an IFSC can provide?

• Fund-raising services for individuals, corporations and governments.
• Asset management and global portfolio diversification undertaken by pension funds, insurance companies and mutual funds
• Wealth management.
• Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms.
• Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching.
• Risk management operations such as insurance and reinsurance.
• Merger and acquisition activities among trans-national corporations.

 

Establishment of IFSCA

• The International Financial Services Centres Authority (IFSCA) was established in 2020 under the International Financial Services Centres Authority Act, 2019. It is headquartered at GIFT City, Gandhinagar in Gujarat.

 

Role of IFSCA

• The IFSCA is a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC) in India. At present, the GIFT IFSC is the maiden international financial services centre in India.
• Prior to the establishment of IFSCA, the domestic financial regulators, namely, RBI, SEBI, PFRDA and IRDAI regulated the business in IFSC.
• IFSCA has been established as a unified regulator with a holistic vision in order to promote ease of doing business in IFSC and provide world class regulatory environment.
• The main objective of the IFSCA is to develop a strong global connect and focus on the needs of the Indian economy as well as to serve as an international financial platform for the entire region and the global economy as a whole.

 

Fin Tech Hub

• The word "FinTech" is a combination of the words finance and technology. Financial technology (fintech) describes new technology that works towards enhancing and automating the delivery and use of financial services.
• In a nutshell, fintech companies make financial services more accessible to the greater public. These services include traditional financial transactions like saving, investing, and loan processing.
• FinTech includes Digital banks, payment wallets, UPI apps, internet banking to digital lending and insurance.
• Examples : Paytm, Paytm Money, PhonePe, MobiKwik, PayU, ETMoney, PolicyBazaar, LendingKart, Freecharge.
• In 2021, the government’s announced setting up of FinTech Hub at Gandhinagar Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC) — commonly known as the GIFT City — is set to provide a platform for fintech startups to expand globally and access capital.

 

So, the IFSCA is a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centres (IFSCs) in India. IFSCA endeavours to encourage the promotion of financial technologies (‘FinTech’) initiatives across the spectrum of banking, insurance, securities and fund management in IFSC.

 

I-Sprint’21

• It is a global FinTech Hackathon Series. The aim of the Hackathon is:

1. To connect IFSCA and GIFT IFSC with fintech Ecosystem
2. To solve Business Problems for the Banking Units at GIFT IFSC and
3. To promote retail business for the Banking Units at GIFT IFSC.

• It is hosted jointly by IFSCA and GIFT city in collaboration with NITI Aayog.

 

Sprint01

• “Sprint01: BankTech", hackathon is first under the I-Sprint series focussing on the Banking Sector and is one of its kind being backed by a Regulator. It shall be conducted virtually and is open to eligible FinTechs from across the Globe.
• Sprint01: BankTech was hosted by IFSCA and GIFT City in collaboration with NITI Aayog.
• The Partners to the Hackathon were ICICI Bank, HSBC Bank, International Centre for Entrepreneurship and Technology (iCreate), Zone Startups and Invest-India.
• The Hackathon was open to all eligible FinTechs from across the globe and was one of its kind being backed by a Financial Sector Regulator.

 

Rewards and recognition proposed under Sprint01: BankTech

• FinTech finalists to be allowed direct entry into IFSCA Regulatory/Innovation Sandbox.
• FinTechs will work directly with the Partner Banks on the problem statement who will provide the APIs, mentoring, guidance, etc.
• iCreate sponsored Price money of Rs 24 lakh
• Business Support Solution Partner benefits of upto $25,000 per startup from Zone Startups India's network.
• The winners of the Hackathon are allowed direct entry into the applicable IFSCA Regulatory/Innovation Sandbox.
• They will receive Regulatory guidance and handholding. After successful exit from the respective Sandbox, they shall get an opportunity to set up businesses at GIFT IFSC.

 

Regulatory Sandbox

• Regulatory Sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.
• A regulatory sandbox is a framework set up by a regulator that allows FinTech startups and other innovators to conduct live experiments in a controlled environment under a regulator's supervision.
• Thus, the regulatory sandbox was described as 'a safe space in which businesses can test innovative products, services, business models and delivery mechanisms without immediately incurring all the normal regulatory consequences'

 

IFSCA Regulatory/Innovation Sandbox

• In 2020 IFSCA introduced a framework for “Regulatory Sandbox”. Under this Sandbox framework, entities operating in the capital market, banking, insurance and financial services space shall be granted certain facilities and flexibilities to experiment with innovative FinTech solutions. They will test financial products in a live environment with a limited set of real customers for a limited time frame.
• These features are fortified with necessary safeguards for investor protection and risk mitigation. The Regulatory Sandbox operates within the IFSC located at GIFT City.
• All entities (regulated as well as unregulated) operating in the capital market, banking, insurance and pension sectors as well as individuals and startups from India and FATF compliant jurisdictions, are eligible for participation in the Regulatory Sandbox. Entities desirous of participating in the sandbox to showcase their innovative FinTech solutions, concepts and business models need to apply to IFSCA.
• IFSCA assesses the applications and extends suitable regulatory relaxations to commence limited purpose testing in the Sandbox.
• As an additional steps towards creating an innovation-centric ecosystem in the IFSC, IFSCA also proposed the creation of an “Innovation Sandbox”. This Innovation Sandbox is a testing environment where FinTech firms can test their solutions in isolation from the live market, based on market related data made available by the Market Infrastructure Institutions (MIIs) operating in the IFSC. The Innovation Sandbox is managed and facilitated by the MIIs operating within the IFSC.

 

Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions. They play a key part in the nation's vital economic infrastructure.

https://pib.gov.in/PressReleasePage.aspx?PRID=1762086