Synopsis
GIFT City is drawing strong interest from multinational companies, with JPMorgan saying more than 100 firms are exploring banking and payment solutions for corporate treasury operations. GIFT City's tax incentives, single regulator, foreign currency capabilities and growing banking ecosystem are positioning it as India's global financial hub for multinational treasury centres.
India’s GIFT City is what many multinationals are excited about as JPMorgan Chase & Co. said more than 100 such companies have approached the Wall Street giant to explore banking and payment solutions for corporate treasury operations over the next 12-to-18 months.
The financial hub in PM Narendra Modi's home state Gujarat is sparking interest in multinational companies and a JPM top executive said it is something that the bank has not seen before.
"Treasury centers are a major theme for GIFT City, and the ability to offer foreign-currency accounts alongside rupee capabilities provides an additional tailwind,” Guhaprasath Rajagopal, managing director and head of payments at JPMorgan India said in an interview, according to Bloomberg.
MNCs including insurance companies and fintech firms are approaching JPM, he said.
GIFT City is India's first financial and tech hub with a global orientation, established in 2015 to compete with global hubs such as Singapore and Dubai. Located in Gujarat, it allows Indian and international companies to do business in foreign currencies, manage their global treasury operations, and access international markets under a single regulator. It offers tax benefits and fewer regulatory restrictions, making it easier and more attractive for companies to raise money from international investors.
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What makes GIFT City different is its International Financial Services Centre (IFSC). It lets businesses carry out foreign currency transactions and offers a base for banks, funds and other financial firms to provide international financial services. Instead of dealing with several regulators, as companies do in the rest of India, businesses in the IFSC work with a single regulator, the International Financial Services Centres Authority (IFSCA), which oversees banking, insurance and capital markets.
“Significant internal evaluation is underway at corporates, particularly among multinational firms,” said Rajagopal.
“Companies across the world want to optimize borrowing costs and deploy surplus cash efficiently, particularly when commodity prices remain volatile,” said the managing director.
GIFT City's banking sector has grown rapidly, with total banking assets crossing $100 billion by September, more than twice the level seen two years earlier. The growth has been helped by a range of incentives, including a 20-year tax break introduced in April.
The financial hub already has 10 corporate treasury centres in operation. These include AMNS Global Treasury Centre IFSC and Amefird Treasury, according to the International Financial Services Centres Authority (IFSCA).
The rapid growth of GIFT City is opening up new business for banks, especially in liquidity management. As more multinational companies bring their cash and funding operations together in one place, banks have a bigger role in helping them manage money efficiently across different markets.
The next phase of growth is expected to come from multinational companies setting up treasury operations in the city.
Rajagopal said JPMorgan provides services such as physical pooling, cash concentration and notional pooling. Physical pooling moves money from the accounts of different group companies into one central account. Notional pooling, on the other hand, combines account balances on paper to improve cash management without transferring the money.
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