Preeti Singh and Saikat Das
GIFT City has granted its first approval to billionaire Azim Premji's family office to invest its capital abroad, raising hopes for the wealthy as they wait for clarification from regulators to take similar steps.
Premji Invest has received in-principle approval to set up a so-called family investment fund (FIF) at Gujarat International Finance Tec-City (GIFT City), according to people familiar with the matter. Dozens of applications for FIFs that allow families to invest offshore in various asset classes and instruments are still pending, the people said.
Premji Invest and billionaire Narayana Murthy-backed Catamaran Ventures were among the first to seek approval, according to the public.
Representatives for the International Financial Services Centers Authority, which governs GIFT City, did not respond to requests for comment, while a spokesperson for Premji Invest declined to comment.
The country has imposed strict controls on moving capital abroad. Residents are allowed to transfer $250,000 each year, including the purchase of real estate, investments in stocks and securities, as well as setting up joint ventures or subsidiaries abroad. GIFT City, touted by the Modi government as a free market pilot, aims to become a financial center unencumbered by regulations and taxes.
Rising prosperity in India has driven the growth of family offices and demand for portfolio diversification. Many started exploring setting up investment offices abroad after the Reserve Bank of India (RBI) relaxed some rules in August 2022. This regulation would allow non-
financial institutions invest up to 400 percent of their net worth through the newly established foreign offices. Bloomberg
However, a few months later, the regulator told bankers that these relaxed rules were not intended to allow wealthy individuals to set up family offices abroad and asked banks to stop facilitating these structures, according to some participants to the call. The RBI also told bankers that it would soon release a document clarifying frequently asked questions on the matter, the people said.
According to the people, RBI is yet to release the document. The central bank did not respond to a request for comment.
GIFT City, which aims to be the “first port of call” for resident Indians who would otherwise have set up offices in Singapore and London, has a broad framework for launching these funds, IFSCA said on its website. IFSCA also aims to be a destination of choice for the Indian diaspora looking to invest their wealth in the country, and for foreigners looking for opportunities in emerging markets. Bloomberg
First print: January 6, 2024 | 12:19 pm IST