India's GIFT City Becomes Global Banking Powerhouse, Stealing Billions From Singapore & Hong Kong!

Author

Abhay Singh | Whalesbook News Team

Detailed Coverage:

India's Gujarat International Finance Tec-City (GIFT City) is emerging as a major international financial hub, drawing global banks to facilitate US-dollar denominated debt for Indian corporates and significantly eroding the market share of established centers like Singapore, Hong Kong, and Dubai. In the fiscal year that ended in March, banks operating from GIFT City disbursed close to $20 billion in dollar loans to Indian companies, accounting for over a third of the total issued globally for local firms. This represents a substantial increase from just two years prior. Major international lenders like Mitsubishi UFJ Financial Group and HSBC Holdings are expanding their operations from GIFT City, while State Bank of India aims for significant annual growth in its GIFT City branch portfolio. This surge is primarily driven by attractive tax incentives, including a decade-long tax holiday on business income and the absence of withholding tax on loans, allowing banks in GIFT City to offer financing that is 50 to 70 basis points cheaper than in other major hubs. This growth is crucial for India, supporting its robust economic expansion and substantial capital expenditure plans, estimated at $800 billion to $1 trillion over the next decade. Despite early successes in derivatives trading, with turnover on the NSE International Exchange exceeding $1 trillion, GIFT City faces challenges such as talent acquisition and developing broader global scale.

Impact This news has a significant positive impact on India's financial sector, corporate borrowing landscape, and its standing as a global financial center. It is expected to boost economic growth, attract foreign investment, and create employment opportunities within India, while also challenging the dominance of existing financial hubs. Rating: 8/10

Difficult Terms: US-dollar denominated debt: Loans or bonds that must be repaid in US dollars. Withholding tax: A tax deducted at source from income paid to a non-resident, often on interest or dividends. Basis points: A unit of measure equal to one-hundredth of a percent (0.01%), used for expressing changes in interest rates or bond yields. Capital expenditure (capex): Funds used by a company to acquire, upgrade, and maintain physical assets like property, buildings, and equipment. Shadow bank: A financial intermediary that provides credit and other financial services but is not subject to the same regulatory oversight as traditional banks. Non-deliverable forward market (NDF): A foreign exchange derivative that allows parties to speculate on or hedge against currency fluctuations without requiring the actual delivery of the currency. Bullion exchange: A marketplace for trading precious metals like gold and silver. Derivatives: Financial contracts whose value is derived from an underlying asset or group of assets, such as futures or options. Corporate treasuries: The department within a corporation responsible for managing its financial assets and liabilities, including cash management, debt, and investments.