The GIFT International Financial Services Centre ("GIFT IFSC"), established in Gandhinagar, Gujarat, is India's first international financial services centre with the intent of catering to global MNCs and financial institutions in alignment with international standards of business. To ensure that the utmost benefits can be provided, the entire zone has been equipped with world-class infrastructure akin to global standards. This newsletter navigates the journey of GIFT IFSC and the International Financial Services Centres IFSCA ("IFSCA") set up under the International Financial Services Centres IFSCA Act 2019.
IFSCA as a unified regulator is also head quartered at GIFT IFSC and is committed to providing a sound and well-structured regulatory environment by providing a single window clearance system. The IFSCA has been able to achieve this through the unification of the powers previously held by four separate regulators: the Reserve Bank of India ("RBI"), the Securities and Exchange Board of India ("SEBI"), the Insurance Regulatory and Development IFSCA of India ("IRDAI"), and Pension Fund Regulatory and Development IFSCA of India ("PFRDAI").
We are providing transactional updates, including a bird's eye view of legal and regulatory updates related to the GIFT IFSC.
Revised Consultation Paper on the Draft Revamped Regulatory Framework for Global Access in the GIFT - IFSC
May 30, 2025 - IFSCA had issued one consultation paper "Consultation Paper on draft Revamped Regulatory Framework for Global Access in the IFSC" on May 08, 2025 seeking comments from the public. The Consultation Paper aimed to enhance the regulatory framework and strategically position GIFT IFSC as a hub for cross-border dealings in securities and other permitted financial products on global stock exchanges, through broker-dealers and intermediaries operating within the IFSC.
It also proposed a pathway for entities currently offering
access to global markets from within India in an unregulated manner
to transition their operations to the IFSC, thereby ensuring these
services operate within a regulated ecosystem and safeguarding the
interests of stakeholders, including Indian retail investors
investing under the Liberalised Remittance Scheme
(LRS).
Following the release of the Consultation Paper, IFSCA conducted
multiple stakeholder meetings and received feedback from
broker-dealers, stock exchanges, subsidiaries of exchanges, and
other relevant market participants.
Based on the feedback and extensive discussions with domestic and international stakeholders, substantial changes were considered necessary to the proposed regulatory framework.
Accordingly, IFSCA issued the revised draft of the proposed regulatory framework for Global Access in the GIFT- IFSC for seeking comments of public and stakeholders.
Key Changes Introduced:
>1. Global Access Providers: The definition of a Global Access Provider ("GAP") now includes broker delas registered with IFSCA who partner with foreign brokers to offer global market access. A clear distinction is drawn between:
- GAPs: Entities directly interfacing with foreign brokers to offer global market access.
- Introducing Brokers: IFSC- registered broker dealers referring clients to GAPS.
- Introducers: Any entity (not necessarily a broker dealer) referring clients to GAPs for a fee or compensation or remuneration.
2. Net worth Requirement: The minimum net worth requirement for a subsidiary of a recognised stock exchange and a GAP engaged in clientele trading has been reduced from USD 1,000,000 (United States Dollars One Million) to USD 500,000 (United States Dollars Five Hundred Thousand). Further, a tiered net worth structure has been introduced to align with the scale and nature of operations and an entry threshold of USD 100,000 (United States Dollar One Hundred Thousand).
3. Regulatory Oversight: A new reporting requirement has been introduced, mandating Global Access Providers engaged in proprietary trading to submit relevant data and records to the stock exchange or its subsidiary, as specified by the IFSCA.
4. Enhanced Client Protection Framework: The client protection framework has been further strengthened through the following measures:
- Mandatory segregation of clients funds from proprietary accounts.
- Comphrensive client disclosures, including details on risks, fees, tax implications, and jurisdiction- specific regulations.
- Explicit responsibility for compliance with KYC, AML and CFT norms.
5. Inspection by Independent Professionals: IFSCA may through an independent member of the Institute of Chartered Accountants of India or a member of the Institute of Company Secretaries of India or a member of the Institute of Cost Accountants of India, undertake an inspection of the activities carried out by a Global Access Provider and an Introduction Broker in the IFSC.
The said Consultation Paper can be referred here.
Source: GIFT IFSCA website [Consultation Paper dated May 30, 2025]
IFSCA Grants Six month Extension for Appointment of GIFT- IFSC-Based Custodians
May 24, 2025 – A circular for an extension of timeline for Fund Management Entities ("FMEs") was issued by IFSCA for the appointment of independent custodians based in GIFT IFSC required under Regulation 132 of the IFSCA (Fund Management) Regulations 2025 ("FM Regulations").
Regulation 132 of FM Regulations mandates the appointment of an independent custodian to provide custodial services for retail schemes, open-ended restricted schemes, and any scheme that manages Asset Under Management ("AUM") above USD 70 Million (United States Dollars Seventy Million). The Custodian should be based within the jurisdiction of IFSC as a standard, unless the local laws of the jurisdiction in which the securities of the investee company are issued, mandates the appointment of a custodian in that jurisdiction.
For schemes that were taken on record by IFSCA and had entered into an agreement with a custodian not based in the IFSC prior to the commencement of the FM Regulations, 2025, a transition period of 12 (twelve) months has been provided to appoint a custodian in the IFSC, if so required under Regulation 132 of the FM Regulations, 2025.
An additional six (6) months from the date of this Circular is
granted for appointing an independent custodian in the GIFT- IFSC,
if required under Regulation 132, for schemes that: (i) were taken
on record after the FM Regulations came into effect (i.e., February
19, 2025), or (ii) were taken on record prior to that date but had
not entered into a custodian agreement as of February 19,
2025.
During the six (6) month period, FMEs of the aforesaid schemes may
appoint an independent custodian in India or in a foreign
jurisdiction regulated by its financial sector regulator and must
ensure necessary arrangements are in place to provide information
to the IFSCA upon request.
Source: GIFT IFSCA website [Circular dated May 24, 2025]
IFSCA Issues Consultation Paper on the Proposed International Financial Services Centres Authority (Procedure for Making Regulations and Subsidiary Instruction) Regulations, 2025
May 22, 2025 - IFSCA issued a consultation paper inviting public comments on the proposed IFSCA (Procedure for Making Regulations and Subsidiary Instructions) Regulations, 2025 ("Draft Regulations"). The Draft Regulations aim to strengthen the regulatory process for drafting, amending, and issuing regulations and subsidiary instructions, thereby enhancing transparency, stakeholder participation, and regulatory clarity, while promoting ease of doing business.
Key Highlights of the Draft Regulations:
1. Subsidiary Instructions: Defined to include circulars, guidelines, frameworks, and similar instruments. Mandatory public consultation is required before issuance if such instructions lay down terms, conditions, or requirements for financial products, services, or institutions, or interpret any regulatory provision.
2. Structured Consultation Process:
- Consultation papers must include background, problem statement, regulatory objectives, international practices, and draft text;
- A minimum 21-day period for public comments;
- Summary of comments and IFSCA's responses to be published prior to final notification.
3. Additional Consultation Mechanisms: IFSCA may adopt additional stakeholder engagement tools such as expert or advisory committees.
4. Periodic Review: All regulations to be reviewed at least once every five years, or earlier if needed, based on effectiveness, litigation trends, global practices, and ease of doing business.
Comments and suggestions may be submitted by June 11, 2025.
The Consultation Paper can be accessed here.
Source: GIFT IFSCA website [Consultation Paper dated May 22, 2025]
Participation of IFSC Banking Units ("IBUs") in International Payment Systems
May 21, 2025 - The IFSCA, empowered under Section 18 of the Payment and Settlement System Act 2007 ("PSS Act") read with Section 13 of the International Financial Services Centres Act 2019 ("IFSCA 2019"), issued policy guidelines to IBUs for governing the international payment systems.
The key policy directions laid down were:
1. No prior approval of IFSCA would be required for participating IBUs as members of the international payment systems when making or receiving payments from banks or financial institutions which fall outside the purview of IFSC.
2. An international payment system that allows IBUs to make or receive payments among themselves—thereby resulting in domestic (i.e., IFSC) transactions—would require appropriate authorization from IFSCA under Section 7(1) of the PSS Act.
3. If the international payment system complies with the abovementioned condition, no prior approval of IFSCA would be required for IBUs as members or participants of the international payment system when transacting with other IBUs.
IFSCA also directed all IBUs to conduct a review of their current participation in the international payment systems and comply and report to the Department of Banking Supervision within 30 (thirty) days from the date of the release of the circular. Further, a submission of the list of all the international payment systems the IBUs had participated in as of March 31, 2025, is to be made.
Source: GIFT IFSCA website [Circular dated May 21, 2025]
Framework to Facilitate Co-investment by Existing Schemes at GIFT IFSC
May 21, 2025 – The Fund Management Regulations 2025 ("FM Regulations") permit co-investment, with or without leverage, through a Special Purpose Vehicle ("SPV") commonly referred to as a Co-Investment Vehicle ("CIV"), hereinafter referred to as a Special Scheme. To operationalize this provision, the IFSCA has introduced a dedicated framework enabling co-investment by venture capital schemes and restricted schemes, thereby allowing existing schemes to establish Special Schemes and execute investments more efficiently.
The framework outlines the structure, objectives, and operational nature of such Special Schemes. A key feature is the flexibility to make investments prior to notifying the IFSCA, with the term sheet required to be filed within 45 (forty-five) days of the investment, thus making the whole process time efficient.
Source: GIFT IFSCA website [Press Release dated May 21, 2025]
IFSCA Issues Framework for Co-Investment via Special Scheme in GIFT IFSC
May 21, 2025 – IFSCA has issued a new regulatory framework to facilitate co-investment by Venture Capital Schemes and Restricted Schemes through the instrument of SPVs referred to as "Special Schemes" under the FM Regulations. The FM Regulations was issued by the IFSCA via notification on February 10, 2025.
The key features of the framework have been summarised as below:
1. Eligibility & Structure: FMEs existing and operational under Venture Capital or Restricted Schemes would be permitted to launch the Special Scheme through the instrument of an SPV, however, subject to the terms and conditions of their placement memorandum.
- The SPVs may have the constitution of a Company, Limited Liability Partnership ("LLP"), or Trust.
- The Special Scheme shall align with the Alternative Investment Fund ("AIF") Category (I, II, or III) of the Existing Scheme.
- The Existing Scheme shall maintain a 25% (twenty five percent) equity share capital, interest, or capital contribution in the Special Scheme.
2. Objective of Special Scheme: The Special Scheme, in alignment with the Existing Scheme, shall be used for co-investment with or without leverage. A Special Scheme may invest in only one portfolio company; however, it may hold securities of multiple entities if such holdings arise from corporate actions or restructurings at the portfolio company level, including amalgamation, demerger, or slump sale.
3. Nature and Tenure: The nature of the Special Scheme and the Existing Scheme shall correspond to each other, the tenure of both the Schemes shall be co-terminus, and the liquidation of the Existing Scheme would result in the liquidation of the Special Scheme.
4. Investor Participation:
- Eligible investors subject to minimum contribution requirements, provided by the FM Regulations, would have the channel of co-investment open to them.
- A fresh Know Your Customer ("KYC") would not be required by existing investors, while new investors will need to comply with IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines 2022.
- Investors would be required to be informed of the Special Schemes before being sought for capital contributions.
5. Filing Requirements: FMEs shall be required to submit a detailed Term Sheet, deemed as the constitutional document by the Banking Units in IFSC, to the IFSCA (as per the format prescribed in Annexure A of the said circular) within 45 (forty five) days of the investment. The Term Sheet shall also be accompanied by a declaration- cum- undertaking. The provision of the Term Sheet with the disclosures mentioned in Regulations 24 and 36 of the FM Regulations shall be made available to the investor(s).
6. Control & Reporting: FME shall be the sole decision-making and controlling authority for the operations of the Special Scheme. Investors of the Special Scheme shall not exercise any rights that hinder the Existing Scheme's compliance with regulatory requirements prescribed by IFSCA.
The activities of the Special Scheme shall be consolidated and reported along with those of the Existing Scheme. Additionally, the Special Scheme must obtain the necessary Special Economic Zone ("SEZ") approvals under the SEZ Act 2005 and rules, prior to the filing of the Term Sheet with the IFSCA.
7. Fees & Compliance: The FME shall pay the applicable fee as specified in the Circular dated April 08, 2025, titled "Fee Structure for Entities Undertaking or Intending to Undertake Permissible Activities in IFSC or Seeking Guidance under the Informal Guidance Scheme."
The said Circular can be referred here.
Source: GIFT IFSCA website [Circular dated May 21, 2025]
IFSCA Publishes Draft TechFin and Ancillary Services Regulations for Public Consultation
May 09, 2025 – IFSCA issued a consultation paper inviting public comments on the Draft IFSCA (TechFin and Ancillary Services) Regulations, 2025 ("Draft Regulations"). The Draft Regulations aim to promote ease of doing business by establishing a unified regulatory framework for entities providing ancillary and TechFin services, as well as for activities permitted to be outsourced by Regulated Entities (REs) of respective financial sector regulators.
Existing ancillary service providers and TechFin entities will be required to obtain a certificate of registration within twelve (12) months from the effective date of the Draft Regulations. Further, Service recipients include: (i) entities in GIFT-IFSC; (ii) BFSI entities located outside India for arranging the delivery of financial services permitted by IFSCA; and (iii) Indian entities solely for establishing offices in IFSC. All service recipients must be non-residents and must not be located in jurisdictions identified in the FATF public statement as high-risk or subject to a call for action.
The comments and suggestion on the Draft Regulations can be shared latest by June 1, 2025.
The Consultation Paper can be accessed here.
Source: GIFT IFSCA website [Consultation Paper dated May 09, 2025]
QNB Becomes the First MEA Bank to Launch a Branch in India's GIFT City
May 07, 2025 – Qatar National Bank ("QNB"), the largest financial institution in the Middle East and Africa ("MEA") region, has become the first bank from the MEA to establish operations in GIFT City, Gujarat. This strategic expansion further strengthens QNB's international network, which now spans 28 (twenty-eight) markets across 3 (three) continents.
Source: The Wire India
IIFT to Establish Campus at GIFT City
May 06, 2025 – To further the Indian ambition of playing a pivotal role in the global trade arena by the cultivation of trade-ready talent, the Indian Institute of Foreign Trade ("IIFT") was successful in securing the approval of the Ministry of Education for the establishment of an off-campus center in GIFT Tower-II in GIFT City, Gandhinagar. The Centre's flagship Master of Business Administration programme in International Business, along with short-term courses and research opportunities in the subject area.
The expansion was in alignment with the University Grants Commission's 2023 Regulations and the IIFT's compliance with the January 2025 issued Letter of Intent. The Institute has proposed a strategic blueprint for its vision to build a multidisciplinary campus with a modern library.
Source: The Times of India
Monarch Networth Capital IFSC Receives Regulatory Clearance to Manage Retail Investment Funds at GIFT IFSC
May 05, 2025 – Marking a significant step towards the actualisation of Monarch Network Capital's IFSC growth strategy, it obtained the regulatory approval through the certificate of Registered Fund Management Entity (Retail) for the management of retail funds in GIFT IFSC. The authorisation permits the firm to offer more expansive investment products to retail investors within the IFSC Framework.
A wide range of fund management activities would become available to Monarch Network Capital, including, but not limited to, investing in securities and financial products, managing and launching retail investment schemes, and handling public offerings of Real Estate Investment Trusts ("REITs"), Infrastructure Investment Trusts ("InvITs"), and Family Investment Funds. Additionally, it would be permitted to undertake non-retail FME (Fund Management Entity) activities, such as launching restricted schemes and special situation funds.
Source: The Hindu Business Line
Ahmedabad-GIFT City Belt Emerges as a Leading Tier-II Hub for Global Capacity Centres
May 02, 2025 – The Ahmedabad-Gandhinagar-GIFT City Corridor has been rapidly establishing itself as India's premier Tier-II destination for Global Capability Centres ("GCCs"). Ahmedabad ranks No.1 among 20 (twenty) Tier-II cities as a conducive environment for GCCs according to an August 2024 Report by global consulting firm Zinnov.
The region is home to over 35 (thirty-five) GCCs and Global In-House Centres ("GICs"), over 25 (twenty-five) IT (information technology) and service providers and more than 60 (sixty) startups. Companies like IBM, Google, TCS, Infosys and Wipro are operational in it.
The 10 (ten) year tax holiday under Section 80LA of Income Tax Act 1961, reduced stamp duty, discounted power tariffs and provident fund reimbursements of up to 100% (one hundred per cent) for women further enhances the appeal of GIFT IFSC.
Source: The Times of India
IFSCA and NISM Sign MoU to Strengthen Capacity Building in GIFT IFSC
May 02, 2025 – The IFSCA and the National Institute of Securities Markets ("NISM") have signed a Memorandum of Understanding ("MoU") to advance capacity building and training in the securities markets at GIFT IFSC, in the presence of Shri K. Rajaraman, Chairperson, IFSCA, and Shri Tuhin Kanta Pandey, Chairperson, SEBI.
Under this collaboration, NISM will support IFSCA in various initiatives, including certification examinations for those entities that are located in the IFSC, development of customised content, question banks, and e-learning modules tailored to IFSCA's requirements, aimed at strengthening professional expertise within the IFSC ecosystem. The MoU with NISM marks a key step in addressing the capacity-building and training needs of securities market stakeholders at IFSC.
Source: GIFT IFSCA website [Press Release dated May 02, 2025]
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