Draft framework on Sustainable Financial Lending

March 4, 2022

On March 2, 2022, the International Financial Services Centres Authority (IFSCA) invited public to comment on “draft framework on sustainable and sustainability-linked lending by financial institutions” in the IFSCs.

Highlights

The draft guidance framework seeks to encourage the IFSC banking units (IBU) and finance companies or finance units (FC/FUs) for internally developing a comprehensive board approved policy on green or social or sustainable or sustainability linked lending.
It intends to provide a broad framework for adoption of principles aligned with existing international standards including green or social loan principles developed by loan market association (LMA), Climate Bond Standards by Climate Bonds Initiative, bond principles developed by the International Capital Markets Association (ICMA) and any other similar recognised standards.

International Financial Services Centres Authority (IFSCA)

International Financial Services Centres Authority was established by central government for regulating all financial services in International Financial Services Centres (IFSCs). It is headquartered in Gandhinagar (Gujarat). Its key functions include:

To regulate financial products like securities, deposits or contracts of insurance, financial institutions and financial services.
To regulate any other financial products, financial services, or financial institutions in an IFSC, notified by the central government.
To recommend any other financial products, financial services, or financial institutions, to the central government, which may be permitted in an IFSC.

Members of IFSCA

IFSCA comprises of 9 members, including:

Chairperson of the authority
A member each from the RBI, SEBI, IRDAI and PFRDA.
Two members from the Ministry of Finance
Two other members, appointed on the recommendation of a Selection Committee.

All the members are appointed by central government. They serve for a three years terms, subject to reappointment.

Unification under one authority

The banking, insurance sector, and capital markets in IFSC which are regulated by multiple regulators like RBI, SEBI and IRDAI will be unified under IFSC authority.

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