Mumbai Proposed As New Asian Financial Centre

by Mary Swire, Tax-news.com, Hong Kong

19 June 2001

The Indian government has asked the Reserve Bank of India (RBI) to look into the possibility of transforming Mumbai into an offshore banking centre, it was revealed recently. The commerce ministry had asked the central bank to consider the logistics of establishing international financial centres in the Special Enterprise Zones (SEZ) that have been established throughout India. However, the current thinking is that Mumbai (formerly Bombay)has a strong environment for financial services, and may in fact, along with other cities like it, be a more suitable location.

At present the RBI is just considering the possibilities, and the form that the city's transformation to international financial hub might take is far from clear. However, officials from the central bank will soon be taking a tour of Asian financial centres, including Shanghai, Hong Kong, and Singapore, in order to take a close look at their systems.

Some fairly sizeable changes would need to be made to India's regulatory regime in order to accommodate an offshore banking centre, including the liberalisation of exchange control rules for foreign entities. However, according to experts, the RBI would not necessarily have to totally dismantle the present exchange control regime or usher in complete convertibility. Senior figures believe that similar flexibilities to those presently afforded to registered FIIs could be afforded to foreign entities on their foreign currency resources held in Mumbai.

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