New Delhi, May 4 -- Funds located in GIFT City have received a breather after the International Financial Services Centres Authority (IFSCA) said it was in talks with the Reserve Bank of India over foreign asset disclosure norms.

The IFSCA is the unified authority in charge of developing and regulating financial products, financial services and financial institutions located in GIFT City. On March 25, the Reserve Bank of India (RBI) had issued FAQs on filing "Annual Return on Foreign Liabilities and Assets (FLA) under FEMA, 1999".

The RBI circular rattled GIFT City-based funds, who said that the directions introduced "great uncertainty" not just for investment funds, but for every entity operating in the IFSCA jurisdiction, including banking units, finance companies, aircraft/ship lessors and ancillary service providers. Following this, VCCircle reported that representatives of two foreign jurisdictions had even reached out to some of these funds providing them alternative locations to operate from.

Through a circular issued on May 1, the IFSCA has now paused all three directions related to GIFT City entities given in the FAQs. These are points from 43 to 45, which cover foreign-asset and investor details of these entities.

The IFSCA circular said: "Financial Institutions are advised that the contents of the said FAQs are being discussed with the Reserve Bank of India. Financial Institutions are further advised to await further instructions from the Authority before taking any action on the matter."

The fund industry had particularly raised concerns about points 43 and 44, which mandated the filing of the RBI FLA return for any entity registered under the IFSCA and operating from GIFT City including any subsidiary established by a foreign entity.

FAQ 45 mandated the disclosure for any investment made by a domestic entity in a company located in GIFT City. It stated that both the domestic company and the entity located in GIFT City would have to declare the details, even if the investment was made via overseas direct investment.

Published by HT Digital Content Services with permission from VC Circle.