INDIA'S FINANCE REVOLUTION: Global Banks Flock to GIFT City, Shaking Up Asia's Financial Giants!

Author

Simar Singh | Whalesbook News Team

Detailed Coverage:

Global banks are increasingly choosing India's Gujarat International Finance Tec-City (GIFT City) to finance Indian corporates, moving significant business away from established Asian hubs like Hong Kong and Singapore. In the fiscal year ending March, banks in GIFT City disbursed nearly $20 billion in dollar loans to Indian companies, a substantial increase from previous years, according to the International Financial Services Centres Authority (IFSCA). Major lenders such as Mitsubishi UFJ Financial Group Inc. (MUFG) and HSBC Holdings Plc are expanding their operations from GIFT City, attracted by tax incentives like a 10-year holiday on business income and the absence of withholding tax on loans. This allows them to offer financing at a 50-70 basis point lower cost compared to other global centers. The surge in lending activity supports India's projected $800 billion to $1 trillion in corporate capital expenditure between fiscal 2026 and 2030. The NSE International Exchange in GIFT City also saw its derivatives turnover cross $1 trillion. However, challenges remain, including attracting talent and developing relative global scale.

Impact: This development significantly bolsters India's position as a global financial hub, providing cheaper capital for domestic businesses and attracting foreign investment. It directly impacts the competitiveness of established financial centers. Rating: 7/10.

Difficult Terms Explained: Gujarat International Finance Tec-City (GIFT City): A government-backed international financial services center in Gujarat, India, designed to compete with global hubs. International Financial Services Centres Authority (IFSCA): The regulatory body overseeing financial services and development in GIFT City. Withholding Tax: A tax deducted at source by the payer of income (e.g., interest on a loan) before it reaches the recipient. Basis Points: A unit used to measure financial percentages; 100 basis points equal 1 percent. Capital Expenditure (Capex): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. Shadow Bank: Financial intermediaries that perform bank-like functions but are not regulated as traditional banks. Treasury: The department of a company or government responsible for managing cash, investments, and financial risks. Derivatives: Financial contracts whose value is derived from an underlying asset (like stocks, bonds, or currencies). Non-deliverable Forward (NDF): A foreign exchange derivative used to hedge against currency fluctuations when physical delivery of the currency is not intended or possible.