- in India
- with readers working within the Law Firm industries
- within Privacy, Employment and HR and Insurance topic(s)
Introduction
The International Financial Services Centres Authority ("IFSCA") has notified the IFSCA (Fund Management) Regulations, 2025 ("FM Regulations, 2025"), introducing a refreshed regulatory framework for fund management activities within IFSCs. These new regulations repeal and replace the earlier IFSCA (Fund Management) Regulations, 2022 ("FM Regulations, 2022"), aiming to enhance operational clarity, investor protection, and alignment with international standards.1
Under the FM Regulations, 2025, any entity that desires to undertake the business of Fund Management shall obtain a certificate of Registration from the IFSC Authority as a Fund Management Entity2 ("FME") and operate either as Authorised FME, Registered FME (Non-Retail) or Registered FME (Retail), Special Situation Funds (special situation asset)3 and their types depending upon the type of FME certification obtained.
Types of Fund Management Entities4
Under the FM Regulations, 2025 fund management entities can be divided into three categories:
- Authorised FME: These FMEs pool money from accredited investors or investors who invest above a specific threshold by private placement and invest in start-ups or through Venture Capital Scheme investing in early-stage ventures. The FMEs established a single family are designed to oversee its family investment fund, focusing on investments in financial instruments such as securities and other approved asset classes.5
- Registered FME (Non-Retail): These FMEs pool money from accredited investors or investors investing above a specified threshold by private placement for investing in financial products which includes securities or other permitted class of permitted assets through one or more restricted schemes. Such FMEs shall also be undertake Portfolio Management Services (including for multi-family office) and act as investment manager for private placement of Investment Trusts (REITs and InvITs). These FMEs are permitted to undertake all activities as permitted to authorised FMEs.6
- Registered FME (Retail): These FMEs pool money from either all investors or a section of investors under one or more scheme for investing in financial products that include securities or other permitted class of permitted assets through retail schemes. They may act as investment manager for public offer of Investment Trusts ("REITs and InvITs") and shall also be able to launch the Exchange Traded Funds ("ETFs"). Such FMEs are permitted to undertake all activities as permitted to Authorised FMEs and Registered FMEs (Non-Retail).7
Eligibility criteria for FMEs
All FMEs must fulfil the criteria mentioned below to obtain a certificate of registration from the IFSC Authority:
- Legal Form of FME: With regard to the legal form, the FM regulations 2025 prescribe that the applicant shall be set up in IFSC in the form of a company or LLP or branch thereof or any other form as may be permitted. Pursuant to the FM Regulations, 2025, a Registered FME (Retail) shall not be permitted in the form of an LLP or branch. The branch structure is permitted only for a FME which is already regulated by a financial sector regulator in India or a foreign jurisdiction for conducting similar activities.8 Where a FME operating in the branch structure in the IFSC, the parent entity shall ring fence the operations of the branch in IFSC, shall maintain minimum capital specified by the authority or any other requirement specified by the Authority. Further, the memorandum of association of the company, or the LLP agreement of a LLP, shall permit it to carry on the activity of Fund Management. A Registered FME (Retail) shall have at least four (4) directors of at least 50 per cent of them being independent directors and not associated with the FME.9
- Track Record and Reputation: The applicant shall have a sound-track record10 and general reputation of fairness and integrity in all business transactions. In case of Registered FME (non-retail) and Authorised FME, the employees must have relevant experience under the regulations.11
- Key Managerial Personnel(s) (KMP): FMEs shall appoint Principal Officers and other Key Managerial Personnel(s) compliance officers with relevant qualifications for fund management.12
- Net Worth Requirements: For registration under FME, the net worth requirement is USD 75,OOO for Authorised FME, USD 5,00,000 for Registered FME (Non-retail) and USD 1,000,000 for Registered FME (Retail).13
- Fit and Proper Criteria: The Principal and KMPs of the FMEs shall be fit and proper i.e., having good reputation and character, honest financial integrity etc.14
- Infrastructure Requirements: The FME shall have the necessary infrastructure, such as adequate space, equipment, communication facilities, and manpower, for providing fund management services. They shall have a dedicated space with security that is accessible to the authorised person(s) of the FME.15
Comparative Analysis
The following table outlines key differences between the IFSCA (Fund Management) Regulations, 2022 and IFSCA (Fund Management) Regulations, 2025, highlighting the potential impact on fund management entities operating within IFSCs:
|
Particulars |
FM Regulations, 2022 |
FM Regulations, 2025 |
Potential Impact |
|---|---|---|---|
|
Regulation |
The fund management under the FM Regulations, 2022 were governed by the IFSCA (Fund Management) Regulations, 2022.16 |
The IFSCA (Fund Management) Regulations, 2025, govern fund management under the FM Regulations 2025.17 |
The IFSCA (Fund Management) Regulations, 2022, have been repealed, and the funds will now be managed under the IFSCA (Fund Management) Regulations, 2025.18 |
|
Placement Memorandum |
The validity of the placement memorandum for launching the venture capital scheme shall be six (6) months from the date it is filled with the Authority.19 |
The Placement Memorandum for launching the Venture Capital shall be valid for twelve (12) months from the date of communication from the Authority to the FME till the first close of the scheme.20 |
The validity of the Placement Memorandum has been extended from six (6) months to twelve (12) months, which will give the FMEs more time to operationalise the schemes.21 |
|
Investment Restrictions and Scheme Corpus under Authorised FME (venture capital scheme) |
The minimum size of the corpus22 shall be USD 5 Million and total corpus shall not exceed 200 million.23 |
The minimum size of the corpus shall be USD 3 Million and the total corpus shall not exceed 200 million.24 |
The minimum corpus size has been decreased from USD 5 million to USD 3 Million, encouraging more investors to participate in the venture capital scheme. However, the upper limit of the investment remains the same.25 |
|
Educational Qualification for Principal Officer and Key Managerial Personnel (KMP) |
Principal Officer and KMP with a professional qualification or post-graduate degree or post-graduate diploma for a minimum of two (2) years in finance, law, or accountancy from a university or institution recognised by the Central or any State Government may be specified by the authority.26 |
Principal Officer and KMP with a professional qualification or post graduate degree or post graduate diploma for a minimum of one (1) year in finance, law, accountancy from a university or institution recognised by the Central or any State Government may be specified by the authority, or CFA or a FRM from Global Association of Risk Professionals or any other relevant educational qualifications as specified by the Authority.27 The minimum education qualification for a Principal Officer holding at least fifteen (15) years of experience in fund management-related activities shall be a graduate degree in any field. |
The Diploma duration for post graduate diploma has decreased form two (2) years to one (1) year in the FM Regulations, 2025. Professional qualifications like CFA and FRM has also been recognised under the FM Regulations, 2025 which were earlier not provided. Further Principal Officer holding at least fifteen (15) years of experience can be a graduate in any field, however such a requirement was not listed under the FM Regulations, 2025. |
|
Third Party Fund Management Services |
No such Third-Party Fund Management Services were recognised under FM Regulations, 2022. |
In these services, a Registered FME manages the schemes on behalf of a third-party.28 |
Under the FM Regulations, 2025, Third Party Fund Management Services were introduced, under which a Registered FME will manage. Provide investment advisory or any similar activity with the concerned financial sector regulator in the country in which the third-party fund is incorporated and procures the third-party fund management services from a Registered FME, any such third-party fund management services were not mentioned in the FM Regulations, 2022. |
Key Takeaways for the Industry
- Regulatory Shift: Entities must re-evaluate operational structures and investor focus as the 2025 Regulations introduce more defined classifications and activity scope compared to the 2022 framework.
- Mandatory Registration: Detailed compliance and licensing requirements make early application preparation critical for uninterrupted fund management operations.
- Investor Segmentation: Clear distinction between Authorised, Non-Retail, and Retail FMEs allows targeted product development but requires compliance with category-specific governance and structural mandates.
- Governance Standards: Higher board independence requirements for retail FMEs will impact corporate structuring, particularly for new entrants.
- Operational Flexibility: Expanded permissions across asset classes and investment vehicles for all FME categories provide industry players with broader strategic opportunities.
- Global Alignment: Enhanced investor protection and international standardisation position IFSC fund managers for cross-border capital mobilisation.
Conclusion
The FM Regulations, 2025, have introduced investor-friendly measures by reducing barriers and increasing operational flexibility. By aligning the regulatory framework with global standards, the new regime seeks to strengthen India's position as a preferred jurisdiction for international fund structuring and investment management. The refined classification of Fund Management Entities, strengthened governance norms, expanded flexibility in legal structures, and broader scope of permissible activities collectively promote transparency, investor protection, and operational sophistication. The FM Regulations, 2025, have also introduced a new Third Party Fund Management Services through which eligible parties can invest in the selected portfolio. These rules have also implemented stronger safeguards in the Fund Management Investment Industry.
Therefore, the FM Regulations, 2025 not only enable a more diverse range of products such as ETFs, REITs, InvITs, and special situation funds but also encourage participation from both domestic and foreign institutional investors. As the ecosystem matures, this framework is expected to attract stronger cross-border participation, nurture innovation in asset management strategies, and create a globally competitive IFSC environment that fuels long-term growth and capital formation in India's financial sector.
Footnotes
1. Inserted via Circular F.No. IFSCA-IF-10PR/1/2023- Capital Markets/7, dated April 08, 2025
3. Regulation 54 (1)(a), Chapter III, Part D: Special Situation Funds FM Regulations, 2025
4. Regulation 3 (4) under the FM Regulations, 2025
5. Regulation 3 (4) (a) under the FM Regulations, 2025
6. Regulation 3 (4) (b) under the FM Regulations, 2025
7. Regulation 3 (4) (c) under the FM Regulations, 2025
8. Regulation 5 (1), Chapter II Registration of Fund Management, FM Regulations, 2025.
9. Regulation 5 (2) (3) (4), Chapter II Registration of Fund Management, FM Regulations, 2025
10. Regulation 6 (2)(a)(i), Chapter II Registration of Fund Management, FM Regulations, 2025
11. Regulation 6, Chapter II Registration of Fund Management, FM Regulations, 2025
12. Regulation 7, Chapter II Registration of Fund Management, FM Regulations, 2025
13. Second Schedule of the FM Regulations, 2025
14. Regulation 9, Chapter II Registration of Fund Management, FM Regulations, 2025
15. Regulation 10, Chapter II Registration of Fund Management, FM Regulations, 2025
16. International Financial Services Centres Authority (Fund Management) Regulations, 2022
17. International Financial Services Centres Authority (Fund Management) Regulations, 2025
18. Inserted via Circular F.No. IFSCA-IF-10PR/1/2023- Capital Markets/7, dated April 08, 2025
19. Regulation 19 (3) of the FM Regulations, 2022
23. Regulation 23 (1) of the FM Regulations, 2022
26. Regulation 7 (4)(a) of the FM Regulations, 2022
27. Regulation 7(5)(a) of the FM Regulations, 2025
28. Regulation 107B (i) inserted by the International Financial Services Centres Authority (Fund Management) (Amendment) Regulations, 2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
