Maharashtra chief minister Devendra Fadnavis is expected to push for Mumbai to be granted the International Banking Operations Centre (IBOC) tag at the upcoming mega event, Mumbai Next, aimed at the transformation of Mumbai Metropolitan Region (MMR) on Friday.
The bid to rebrand Mumbai as a mega financial services hub will be the key point of this state government-organised event. With the long-awaited tag of International Finance City slipping away from the megapolis to Gujarat International Financial Tech (GIFT) city, the state government is hoping to win back something for the city by repositioning Mumbai as an international banking centre.
This will be presented as a wishlist to the Union finance minister Arun Jaitely and minister of state for finance Jayant Sinha. “You can’t take away the natural advantage that Mumbai has. No other city can match Mumbai,” said Fadnavis.
IBOC, first envisaged by Bombay First - initiative of Mumbai corporate houses that are partnering with the government for Mumbai makeover - had been endorsed by the Empowered Committee on Mumbai makeover in 2012.
Such an IBOC set up through separate regulatory and legal amendments will offer limited operating licenses to international and Indian banks to set up off-shore banking units. It will allow banks and corporate houses to deploy and raise foreign exchange within the country where loans and deposits in international convertible currency will be booked.
Instead of retail banking services, the units in the centre will offer services such as regional trading of foreign currency, risk management operations, treasury management operations and financial engineering of big projects, among others.
“An IBOC can be set up with minor amendments to the Foreign Exchange Management Act, Banking Regulation Act, Reserve Bank of India Act and the Income Tax Act. The loss of income due to absence of IBOC for Mumbai is to the tune of $1 billion a year,” said Narinder Nayar, chairman, Bombay First.
Fadnavis will seek tax breaks for such units to woo multinationals and Indian corporates to set shop in Mumbai instead of other global cities such as Singapore or Hong Kong so that all income earned by an IBOC unit will be exempt from taxes and levies.
* In 2007, the Centre-appointed Percy Mistry committee submitted its report on making Mumbai as IFC. However, the report has been gathering dust since then. Now, GIFT Sez, in Gujarat is expected to get this tag
* A case had been made for Mumbai as an international finance centre because it falls in the right time zone between Tokyo and London and is already established as the financial and money centre of India
* With the international finance centre tag likely to go to Gujarat, CM is pitching for the next big thing, international banking operations centre in Mumbai
* Global slowdown in 2008 shut down any discussion on this, especially since it was widely seen that India was insulated from the slow down due to absence of capital convertability
* The banking centre will however require only minor amendments to Foreign Exchange Management Act (2000), Banking Regulation Act (1949), the Reserve Bank of India Act (1934)
* It will give restricted operating licenses to international banks and Indian banks to set up off shore units that can offer wholesale banking services including trading of foreign currency, financial engineering of big projects
* The hub will help banks and corporates to raise foreign exchange directly within the country where deposits and loans in internationally convertible currency will be booked
* These units will be given tax breaks competitive to those given in overseas centres in places such as Singapore and Hong Kong to woo multinationals.