Entry into GIFT IFSC is a single-window process (Article 3). Exit is not. It involves at least two separate authorities, and for a company that wishes to cease to exist altogether, a third. Nothing in the framework consolidates them, and the sequencing between them is left to the entity to work out. This article sets out the components.

Decide What Kind of Exit Is Intended From GIFT IFSC

Four types of exit from GIFT IFSC are possible, each involving different regulatory and procedural requirements:

1. Ceasing a regulated activity while keeping the entity and its IFSC unit — surrender of one registration only.
2. Leaving the IFSC but keeping the company alive elsewhere in India — surrender of all IFSCA registrations, plus exit as an SEZ unit, plus corporate changes.
3. Winding up the company — the above, plus a liquidation or winding-up process.
4. Transferring the business to another IFSC unit rather than closing it — an asset transfer under the SEZ Rules rather than an exit.

Surrendering the IFSCA Registration

There is no single surrender provision. Each rulebook has its own, and they share a structure with instructive variations.

Three points follow. First, surrender is not unilateral: in every framework examined, it takes effect only when IFSCA accepts it. Second, the Authority’s consideration is substantive, not ministerial — the payment services test is expressly framed around effect on users and on the ecosystem, and comparable considerations inform the others. Third, client-facing obligations come first. A fund manager must deal with its schemes, a payment service provider with user balances, and an insurance office with its policy obligations, before the registration can sensibly be given up. Surrender is the last step of a wind-down, not the first.

A surrender must also be distinguished from suspension or cancellation by the Authority, which is an enforcement outcome with different consequences (Article 4).

Leaving the SEZ

An Gift City IFSC unit is a unit in a Special Economic Zone, and exit is governed by rule 74 of the SEZ Rules, 2006. Its features are:

• the unit may opt out with the approval of the Development Commissioner. For a unit requiring IFSCA registration, authorisation or licence, that function is discharged by the Administrator (IFSCA) under section 12 of the SEZ Act as modified by the notification of 28 February 2024 (Article 3); GIFT SEZ’s exit SOP (G1.1, 3 February 2025) accordingly directs IFSC units to the Office of the Administrator (IFSCA) and other units to the Development Commissioner, GIFT SEZ;
• exit is subject to payment of applicable duties on imported or indigenous capital goods, raw materials, components, consumables, spares and finished goods in stock — with capital goods depreciated in accordance with rule 49(1);
• a unit that has failed to achieve positive Net Foreign Exchange is liable to penalty under the Foreign Trade (Development and Regulation) Act, 1992;
• penalties must be paid, and where an appeal is pending, a stay order and bank guarantee are required;
• where approval conditions remain unfulfilled, a legal undertaking is executed for any penalty that may be imposed;
• the unit retains its status as a unit until the date of final exit; and
• a legal undertaking in Form L is executed on exit.

For a services-only IFSC unit, the duty exposure is usually confined to imported capital goods — typically IT equipment and fit-outs — but it is real, and it is calculated on depreciated value rather than waived.

Rule 74A offers the alternative: transfer of assets to another unit, subject to conditions including minimum tenure of approval or lease, a minimum period of operation, approval by the relevant committee, and transfer of duties and obligations to the transferee. Where a group wishes to consolidate rather than close, this route preserves value that a rule 74 exit would surrender.

The Corporate Layer

A company that ceases to be licensed in the IFSC cannot simply carry on. The exemption notifications of 4 January 2017 require its name to carry the “IFSC” element and its registered office to remain at the IFSC at all times (Article 44). Exit therefore entails a change of name and of registered office — and, at the same moment, the loss of the governance relaxations the notifications conferred, including on independent directors, committees and board meeting frequency. A board that has been meeting twice a year must revert to the ordinary regime.

Where the intention is to dissolve the company, the route is constrained by an issue examined in Article 46. Voluntary liquidation under section 59 of the Insolvency and Bankruptcy Code is available to a corporate person, and section 3(7) excludes a financial service provider. An IFSC entity that holds an IFSCA authorisation to carry on an activity within section 3(16) of the Code is very likely outside section 59, and must look to winding up under Chapter XX of the Companies Act, 2013. This should be established before a wind-down timetable is published to stakeholders, because the two routes differ substantially in duration and in the role of the Tribunal.

A Workable Sequence

1. Settle the client and counterparty position — redeem or transfer schemes, close out positions, discharge user balances, and run off or novate policies.
2. Apply for surrender of each IFSCA registration, allowing time for acceptance and for any conditions the Authority imposes.
3. Quantify the SEZ exit cost — duties on depreciated capital goods, any NFE shortfall exposure, and pending proceedings.
4. Obtain the opt-out approval from the Administrator (IFSCA), or from the Development Commissioner where that office remains the approving authority, and execute the Form L undertaking, remembering that unit status continues until final exit.
5. Make the corporate changes — name, registered office, and reinstatement of the ordinary Companies Act governance obligations.
6. Close the FEMA position — foreign currency accounts with IFSC Banking Units, and final reporting.
7. Choose and begin the dissolution route, if the company is not to survive.

What is not Consolidated

There is no single “exit framework” for GIFT IFSC comparable to the single-window entry process, and no published instrument was traced that sequences the IFSCA surrender against the SEZ exit. In practice the two must be run in parallel, with the regulatory surrender conditioned on the wind-down and the SEZ exit conditioned on the duty settlement. Entities planning an exit should expect to negotiate the timetable with both authorities rather than to follow a prescribed one.

The Letter of Approval while Winding Down

IFSCA’s circular of 10 August 2026 directs every regulated entity to hold, at all times, a valid and subsisting Letter of Approval under the SEZ Act together with its IFSCA registration, licence or other regulatory instrument. The circular records that a Letter of Approval is valid for one year where operations have not commenced and five years after commencement, and that renewal must be sought at least two months before expiry. Business may not be conducted without these documents. For an entity in run-off, the practical point is that the Letter of Approval must not be allowed to lapse while client positions, assets or obligations remain to be wound down, even though surrender of the regulatory instrument is in train.

FAQs

1. What are the main steps for exiting GIFT IFSC?

Exit from GIFT IFSC generally involves surrendering IFSCA registrations, obtaining SEZ exit approval, completing corporate changes and closing the FEMA position.

2. Can an IFSC entity surrender its IFSCA registration unilaterally?

No. Surrender generally becomes effective only after IFSCA accepts the application, subject to the applicable regulations.

3. What happens when a company exits the IFSC but continues in India?

It must address its SEZ exit, change its name and registered office as required, and comply with ordinary Companies Act governance requirements.

4. Can an IFSC entity use voluntary liquidation under the IBC?

An entity authorised to provide financial services may fall outside the voluntary liquidation route under Section 59 of the IBC. Its eligibility must be assessed before choosing the winding-up procedure.

5. Can an IFSC business transfer its assets instead of closing?

Yes. Rule 74A of the SEZ Rules, 2006, provides a conditional route for transferring assets to another SEZ unit.

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GIFT IFSC provides a regulated framework for global financial institutions to establish back-office and support operations in India. The IFSCA (Global In-house Centre) Regulations, 2025 govern captive services provided to entities within a financial institution group, while the IFSCA (TechFin and Ancillary Services) Regulations, 2025 cover eligible service providers serving third-party clients. Understanding the scope of each framework helps businesses identify the appropriate registration, eligibility requirements and compliance obligations for their operations in GIFT IFSC.

The GIC Regime

A Global In-house Centre in GIFT IFSC is a unit providing services in relation to financial products and financial services to entities of its own Financial Institution Group. The IFSCA (Global In-house Centre) Regulations, 2025 govern registration and operation.

Eligibility and form. The applicant must be connected with a Financial Institution Group, whose group entities are defined to include financial institutions in an IFSC. Where the framework permits a third-party model, the application may be made by the third party with the prior authorisation of the Financial Institution Group, evidenced by an authorisation letter furnished to IFSCA. Promoters or partners must be from jurisdictions not identified in the FATF public statement.

The unit may be a company or LLP incorporated in the IFSC, a branch of a company or LLP incorporated outside the IFSC, or another form IFSCA permits.

Registration. Operations may not commence without a certificate of registration. Applications go through the SWIT portal. IFSCA communicates deficiencies and allows thirty days to rectify, and may not reject without a reasonable opportunity to make written submissions. IFSCA may grant in-principle approval, after which the applicant has 180 days, extendable, to comply with the regulations and the conditions. The certificate then remains valid unless suspended or cancelled, or surrendered and accepted, and the unit must immediately inform IFSCA of material changes.

What a GIC may do, and for whom. A GIC Unit provides services in relation to financial products and services, to entities of its group located in jurisdictions that are not FATF-listed. A proviso permits services to Indian entities of the group, for the purpose of delivering GIC services from the IFSC, not exceeding 10% of the GIC Unit’s total revenue for the relevant financial year. That 10% cap is the boundary between an export-facing captive and a domestic outsourcing operation, and it must be monitored annually.

A separate restriction states that a GIC Unit shall not be set up by transferring existing operations. This mirrors conditions found elsewhere in the IFSC framework, including in the 2024 notification of book-keeping and related services and in the anti-splitting condition for the income-tax deduction (Article 5). The policy is consistent: the IFSC is intended to attract new activity rather than to relocate existing Indian activity for concessional treatment.

People and currency. The GIC Unit must have a principal officer responsible for overall activities and a compliance officer responsible for policies, procedures, records and applicable laws, reporting to the board or head of the organisation. Both must be full-time employees based in the IFSC. Operations and the balance sheet must be in specified foreign currencies, and reporting to IFSCA is in US dollars unless otherwise specified.

Relaxation. IFSCA may relax strict enforcement on application with a non-refundable fee, and must process a complete application within thirty days, recording reasons.

The Ancillary Services Regime

Where the services are provided to persons outside the provider’s own group, the relevant framework is the IFSCA (TechFin and Ancillary Services) Regulations, 2025 (Article 38). Its First Schedule permits a wide range of services that support financial activity, including fund administration and fund accounting, compliance management support, enterprise governance support, risk management support, auditing, actuarial services, valuation, secretarial services, insolvency professional and liquidation support, knowledge and legal process outsourcing, human resources and payroll, customer care, marketing support, family office support, and global mobility services.

Its Third Schedule excludes core activities that a home regulator does not permit to be outsourced, activities regulated under other IFSCA frameworks, facility management, transport and logistics, and anything that does not constitute making arrangements for carrying on the financial services listed in the IFSCA Act.

Choosing the Right Registration

Choosing the right registration in GIFT IFSC requires distinguishing between the IFSCA (Global In-house Centre) Regulations, 2025, which govern eligible captive operations, and the IFSCA (TechFin and Ancillary Services) Regulations, 2025, which cover eligible services provided to third-party clients.

An entity that begins as a captive and later wishes to serve third parties, or vice versa, is changing regime, not merely expanding. That change should be planned as a fresh authorisation question.

An AML Point that is Easy to Misread

Under clause 1.2.3 of IFSCA’s AML, CFT and KYC Guidelines, a GIC registered under the IFSCA Global In-house Centres Regulations is exempt from those Guidelines, as is a Financial Crime Compliance Services Provider registered under the 2024 book-keeping regulations. The exemption is conditional: exempt entities must still undertake and document a business risk assessment, and any financial institution transacting through third-party service providers remains subject to that requirement (Article 35).

Exempt status also does not remove the obligations of the group entities being served, which remain subject to their own regulators’ AML requirements, nor the cyber security obligations that apply to regulated entities, where GICs and small entities received a conditional three-year relief in March 2026 (Article 36).

Practical Checklist

• Fix the service perimeter first, since it determines which regulation applies.
• Model the 10% Indian-revenue cap for a GIC and build the reporting to evidence it annually.
• Do not build on transferred operations. Both the GIC regulations and other IFSC instruments contain anti-relocation conditions.
• Staff the IFSC office genuinely. The principal officer and compliance officer must be full-time and based in the IFSC.
• Plan the 180-day window between in-principle approval and registration, since it drives premises, hiring and systems timelines.

Frequently Asked Questions

1. What is a Global In-house Centre (GIC) in GIFT IFSC?

A GIC provides services related to financial products and financial services to entities within its own Financial Institution Group.

2. Which regulations govern GICs in GIFT IFSC?

The IFSCA (Global In-house Centre) Regulations, 2025 govern the registration and operation of GICs.

3. Can a GIC provide services to Indian group entities?

Yes. Services to Indian group entities are permitted, subject to the limit of 10% of the GIC Unit’s total revenue for the relevant financial year.

4. What regulations apply to third-party ancillary service providers?

The IFSCA (TechFin and Ancillary Services) Regulations, 2025 govern eligible providers serving clients beyond their own group, subject to the applicable schedules.

5. Can an existing operation be transferred to GIFT IFSC to establish a GIC?

No. The GIC Regulations expressly prohibit setting up a GIC by transferring existing operations.

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Payments regulation everywhere begins with a definitional question: which activities are payment services, and which merely support them. The IFSCA (Payment Services) Regulations, 2024 answer that question with a short list, a longer list of exclusions, and a proportionality mechanism that scales obligations with size. For a fintech considering GIFT IFSC, those three elements determine whether authorisation is needed at all, and what it will cost.

The Five Payment Services

Under Schedule I, Part A, of the IFSCA (Payment Services) Regulations, 2024, five activities qualify as payment services in GIFT IFSC:

• Account issuance service, including e-money account issuance.

• E-money issuance service.

• Escrow service.

• Cross-border money transfer service.

• Merchant acquisition service.

Under Regulation 3, any person seeking to provide payment services in or from GIFT IFSC must obtain a certificate of authorisation from the International Financial Services Centres Authority (IFSCA), unless specifically exempt. This requirement also covers providers operating from GIFT IFSC while serving customers outside India, as the regulations recognise payment service users both within and outside the IFSC.

A payment service provider in GIFT IFSC must be a company. However, persons specified in Schedule IV are exempt from the authorisation requirement, subject to the applicable conditions.

What is not a Payment Service

Part B excludes a series of activities that would otherwise be caught. They include:

• payment transactions by a commercial agent authorised to negotiate or conclude the sale or purchase of goods or services;
• transactions based on paper instruments such as cheques, cashier’s orders, demand drafts, traveller’s cheques, gift cheques and paper postal orders;
• transactions within a payment or securities settlement system between payment service providers, settlement agents, central counterparties, clearing houses, central banks and other participants;
• securities asset servicing payments such as dividends, income, distributions, redemptions or sales carried out by such persons;
• transactions between payment service providers, their agents or branches for their own account;
• intra-group transactions between a holding company and its subsidiary, or between subsidiaries of the same holding company, without intermediary intervention by a payment service provider other than group entities;
• cash-in-transit services;
• technical service providers that support payment services without at any time possessing the funds to be transferred, including processing and storage of data, trust and privacy protection services, data and entity authentication, information technology, communication networks, and provision and maintenance of terminals and devices; and
• limited-network and limited-range instruments, being instruments usable only at the issuer’s premises, within a limited network of providers with direct commercial agreements, or for a very limited range of goods or services.

The technical service provider carve-out is the one most often relied on by technology vendors. Its condition is precise: the provider must never be in possession of the funds. A vendor that touches settlement flows, even briefly, falls outside it.

Regular and Significant Providers

The regulations create two tiers. A regular payment service provider is any authorised provider other than a significant one. IFSCA designates a provider as significant when the Part C thresholds are met:

Designation is not merely a label. It changes the capital requirement and brings heightened supervisory expectations.

Net Worth

Schedule V sets minimum net worth on an ongoing basis:

• a regular provider must have net worth of USD 100,000 on the date of commencement of operations, rising to USD 200,000 by the end of the third financial year from the year of commencement; and
• a significant provider must reach USD 250,000 within ninety days of designation, rising to USD 500,000 by the end of the third financial year from the year of designation.

Net worth is defined to comprise paid-up equity capital, compulsorily convertible preference shares, free reserves, share premium and capital reserves representing surplus on sale of assets, excluding revaluation reserves, and adjusted for accumulated losses, intangible assets and deferred revenue expenditure.

Authorisation and Lifecycle

Application and evaluation. Applications are made under regulation 4 in the specified manner. IFSCA evaluates against the criteria in regulation 8, and grants authorisation under regulation 10 when satisfied that the conditions are met. Where authorisation cannot be granted, IFSCA communicates the deficiencies before refusing.

Fit and proper. Relevant persons must satisfy the fit and proper requirements in Schedule II. The provider must establish systems and controls to ensure this, and carry out evaluations in the prescribed format both at appointment and at reasonably regular intervals thereafter.

Commencement. Operations must begin within six months of authorisation.

Surrender and withdrawal. A provider may apply to surrender its authorisation in the format in Schedule III, with separate requirements depending on whether operations have commenced. IFSCA may act where a provider fails to comply with conditions.

Operating Obligations

The regulations impose a governance and risk framework that will be familiar to regulated payment businesses elsewhere:

• comprehensive and clear documentation of governance arrangements;
• a risk management policy covering the range of risks arising in or borne by the provider;
• a risk-based framework to assess criticality, with planning and due diligence before entering into arrangements, addressing outsourcing risk; and
• identification, documentation and, so far as practically feasible, testing of the matters specified.

Safeguarding of user money. Regulation 23, read with Schedule VI, governs safeguarding of money received from payment service users. This, together with the escrow-service definition, which requires money to be held in an escrow account with an IFSC Banking Unit or as otherwise specified, is the core customer-protection mechanism of the regime.

Points to Settle before Applying

• Classify the activity precisely. The difference between a payment service and a technical service is possession of funds, and it decides whether authorisation is needed.
• Model the designation thresholds. Growth into “significant” status brings a ninety-day capital deadline.
• Plan the safeguarding architecture early, including the IBU relationship for escrow and user funds.
• Check the intra-group exclusion if the proposed flows are between group entities, since the exclusion is conditioned on there being no intermediary intervention by a non-group payment service provider.
• Read the regulations with the wider IFSC rulebook, including AML and KYC obligations (Article 35) and cyber security requirements (Article 36), which apply to authorised providers as regulated entities.

Frequently Asked Questions

1. What are the IFSCA (Payment Services) Regulations, 2024?

They regulate payment service providers operating in or from GIFT IFSC, including authorisation, capital, safeguarding and compliance requirements.

2. Which activities qualify as payment services under IFSCA regulations?

The five services are account issuance, e-money issuance, escrow, cross-border money transfer and merchant acquisition.

3. Is authorisation mandatory for payment service providers in GIFT IFSC?

Yes. Regulation 3 generally requires a certificate of authorisation to provide payment services in or from the IFSC, subject to specified exemptions.

4. What is the minimum net worth for a payment service provider?

Regular providers must initially maintain USD 100,000, while significant providers must reach USD 250,000 within 90 days of designation, subject to the prescribed requirements.

5. What are the safeguarding requirements for payment service providers?

Regulation 23 and Schedule VI govern the safeguarding of money received from payment service users.

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India is one of the world’s largest gold markets, and for most of its modern history gold entered the country through a narrow channel: nominated agencies notified by the RBI or the DGFT. GIFT IFSC changed that by creating a second channel, built on three legal moves made between 2020 and 2022, and now consolidated in the IFSCA (Bullion Market) Regulations, 2025.

The Three Foundations

Jurisdiction. By a notification of 31 August 2020, the Central Government extended IFSCA’s powers and functions to bullion spot delivery contracts and bullion depository receipts. Without that step, bullion would have sat outside IFSCA’s perimeter, which is defined by financial products and services (Article 1).

Securities characterisation. By a notification of 24 December 2021, bullion depository receipts (BDRs) and bullion spot delivery contracts were notified as securities under the Securities Contracts (Regulation) Act, 1956. This brought the exchange, clearing and depository architecture of securities law to bear on physical metal.

Market infrastructure. The India International Bullion Exchange IFSC Limited was granted recognition as the bullion exchange and bullion clearing corporation on 10 December 2021, with renewal notified in December 2022.

The 2025 Regulations

The IFSCA (Bullion Market) Regulations, 2025 were made under the IFSCA Act together with sections 4, 8A and 31 of the SCRA and sections 23G and 25 of the Depositories Act. They provide the framework for recognition of bullion exchanges and bullion clearing corporations, and registration of bullion depositories and vault managers.

Key structural features include the following.

Capital. A bullion exchange must maintain a minimum net worth of USD 10 million at all times, and so must a bullion clearing corporation. Distributions to shareholders are restricted until the prescribed net worth is met.

Membership and regulation of members. The regulations define a “bullion trading member” as an entity having trading rights on a bullion exchange, and require the exchange to regulate the working of its trading members, including through inspection and audit of members and intermediaries.

Clearing protections. Collateral, deposits and margins contributed by a trading or clearing member are given priority over other liabilities of, or claims against, that member. This is the familiar default-waterfall protection that makes central clearing viable.

Ownership and governance. The regulations restrict shareholding and control in a bullion exchange and clearing corporation, and contain detailed provisions to keep trading and clearing members, their associates, agents and shareholders out of governance positions, subject to carve-outs for specified institutions. Directors and key management personnel must be fit and proper, must follow a code of conduct, and must report wrongdoing to the governing board or to IFSCA. IFSCA may act, including by removal, after giving an opportunity of being heard.

Segregation of functions. Like securities market infrastructure institutions, a bullion exchange or clearing corporation must segregate its functions into three verticals: critical operations; regulatory, legal, compliance, risk management and customer grievances; and other functions including business development. The first two verticals must receive higher priority in resource allocation, and the adequacy of resources must be assessed periodically and objectively.

Vaults and depositories. The regulations provide for registration of bullion depositories and vault managers, with IFSCA empowered to specify requirements including net worth. The BDR mechanism depends on this: a beneficial owner is the person whose name is recorded as such with a bullion depository, and the physical metal sits with a vault manager.

Who May Import Gold through the Exchange

The commercially transformative provision is not in the IFSCA regulations at all. It is in DGFT Notification No. 49/2015-2020 dated 5 January 2022, which amended the import policy conditions for gold under the relevant ITC(HS) codes.

The revised policy conditions provide that, in addition to nominated agencies notified by the RBI (for banks) and the DGFT (for other agencies), “qualified jewellers as notified by International Financial Services Centres Authority (IFSCA) will be permitted to import gold under specific ITC(HS) Codes through India International Bullion Exchange IFSC Ltd. (IIBX)”. The notification preserves the existing treatment of imports under Advance Authorisation and of supplies of gold and silver, which continue to be governed by the relevant provisions of the Foreign Trade Policy.

The route is no longer confined to gold or to qualified jewellers. Later DGFT notifications, including Notification No. 35/2023 dated 11 October 2023, permit qualified jewellers to import silver under specified ITC(HS) codes through IIBX. IFSCA’s Consolidated Circular of 10 October 2025, updated on 15 June 2026, governs imports of gold or silver by qualified jewellers and by valid India–UAE CEPA Tariff Rate Quota (TRQ) holders through IIBX. After this article’s cut-off, IFSCA’s circular of 22 September 2026 relaxed the eligibility criteria for notification as a qualified jeweller. Entities holding a valid DGFT Advance Authorisation, a Registration-cum-Membership Certificate of the Gem and Jewellery Export Promotion Council, or a DGFT authorisation for specified ITC(HS) codes may now apply, subject to importing only the authorised items, trading through a Bullion Trading Member and, where applicable, using imports only for Advance Authorisation export purposes. The updated consolidated circular should be read as the operative IFSCA text.

Three points follow for a jeweller.

1. Status is regulatory, not contractual. A jeweller must be notified as a qualified jeweller by IFSCA, under the criteria IFSCA specifies, before it can use this route.
2. The route is exchange-specific. The permission is to import through IIBX, not to import generally.
3. The product codes matter. The permission operates under specified ITC(HS) codes; the classification of the metal being imported determines whether the route is available.

Why the Structure Matters Legally

The GIFT IFSC bullion market is an example of a broader technique described in Article 1: the Central Government extends the IFSCA perimeter by notification, characterises an instrument as a security, and then lets securities-market machinery, exchange recognition, clearing corporation obligations, depositories and vault managers, do the regulatory work. The result is that a physical commodity trade is executed, cleared and settled within a framework designed for financial instruments, with the metal represented by a depository receipt.

For a trading participant, this has practical consequences. Disputes and conduct issues arising on the exchange sit within the securities-market framework administered by IFSCA, including the market abuse rules discussed in Article 26 where securities are involved. The tax position of BDRs has been addressed separately: BDRs were notified under section 47(viiab) of the Income-tax Act, 1961, the predecessor of the capital gains provisions now found in the Income-tax Act, 2025 (Articles 7 and 8), and the Income-tax Act, 2025 itself refers to bullion depository receipts in its capital gains provisions.

What Remains to be Checked Before Trading

• Qualified jeweller notification and its conditions, which are set by IFSCA and may be amended.
• Exchange bye-laws, rules and regulations, which the regulations require the exchange to frame and which govern membership, trading, settlement and default handling.
• Customs and Foreign Trade Policy compliance, since the DGFT notification changes who may import and through which venue, but does not displace other trade-law requirements.
• Vaulting and delivery logistics, including the terms on which the vault manager holds the metal and how a BDR is surrendered for physical delivery.

FAQ

1. What are the IFSCA (Bullion Market) Regulations, 2025?

They establish the regulatory framework for bullion exchanges, clearing corporations, depositories and vault managers in GIFT IFSC.

2. What is IIBX?

India International Bullion Exchange IFSC Limited (IIBX) is the recognised bullion exchange and clearing corporation in GIFT IFSC.

3. Who can import gold through IIBX?

Qualified jewellers notified by IFSCA and other eligible participants under applicable provisions, including qualifying India–UAE CEPA TRQ holders, may use the permitted import route subject to the relevant conditions.

4. What is a Bullion Depository Receipt (BDR)?

A BDR represents bullion held through the bullion depository and vault manager framework, allowing the metal to be represented through a depository receipt.

5. What is the minimum net worth for a bullion exchange?

A bullion exchange must maintain a minimum net worth of USD 10 million at all times.

The post The Bullion Market in GIFT IFSC: Exchange, Depository Receipts and Who May Import Gold appeared first on Bhatt & Joshi Associates.

Not all fund management in GIFT IFSC involves a pooled fund. Registered Fund Management Entities (FMEs) can offer portfolio management services (PMS) to individual clients or provide third-party fund management services by managing schemes on behalf of another fund manager. Introduced in 2025, the third-party framework creates an additional route for fund managers to access GIFT IFSC, subject to specific authorisation, capital and compliance requirements.

Portfolio Management Services

A Registered FME may offer portfolio management services (PMS) to clients under Chapter VI, Part A.

The client relationship. Before entering into a portfolio management agreement, the FME must provide a disclosure document covering the services offered, risk factors, client representations and financial performance. A written agreement must then set out the terms, and the regulations preserve the client’s ability to withdraw funds or securities before maturity of the contract in the circumstances specified. The FME must furnish periodic reports covering, among other things, the composition of the portfolio, and give each client access to them.

Minimum size. An FME may not accept funds or securities worth less than USD 75,000 from a client under a portfolio management agreement.

Where client money sits. Client funds of a client availing PMS, other than advisory-only clients, may be maintained in a specific client account with a Banking Unit, a bank in India or a foreign bank, or in a specific client account with a regulated broker-dealer in the IFSC. Where funds are held in a client’s bank account, the FME must operate the account itself or through a custodian and provide details of all such accounts.

Segregation. Each client’s securities holdings must be segregated in separate accounts. An omnibus structure is permitted only where prior client consent has been obtained and adequate checks ensure that client securities are earmarked separately.

Fiduciary duties and prohibitions. The FME acts in a fiduciary capacity and may not derive any direct or indirect benefit from client funds or securities. It may not borrow funds or securities on behalf of a client. It may not use client portfolios for derivatives without express client consent. Investment must be in terms of the agreement, and for discretionary PMS the regulations restrict the permitted investment universe.

Custody. An FME acting as a portfolio manager, other than one providing only advisory services, must appoint a custodian for the securities it manages or administers.

Fees. Fees may be fixed, return-based or a combination, but the FME may not guarantee or assure any return, directly or indirectly.

Multi-family offices. Regulation 81 permits an FME to provide services to a multi-family office under a portfolio management agreement, subject to conditions IFSCA may specify. This is the route for a manager serving several families, as distinct from the single-family Family Investment Fund (Article 20).

Third-Party Fund Management: An IFSC Manager for Someone Else’s Funds

Part D of Chapter VI, inserted with effect from 30 July 2025, permits a Registered FME to launch and manage schemes on behalf of a third party.

The concept. “Third-party fund management services” means the activity where a Registered FME manages schemes on behalf of a third party. A “third-party fund manager” is an entity registered or regulated for fund management, portfolio management, investment advisory or similar activity by the financial sector regulator in its country of incorporation, which avails those services from a Registered FME.

The commercial logic is clear: an offshore manager without an IFSC presence can access an IFSC platform, while the regulated responsibility stays with the IFSC entity.

Authorisation and responsibility. An FME intending to do this must obtain a separate authorisation from IFSCA under Part D. It must strengthen its compliance function and deploy resources commensurate with its operations so that each scheme receives adequate compliance focus. Critically, regulation 107C(4) provides that notwithstanding any arrangement with the third party, including any indemnity, the FME continues to be liable for all obligations and liabilities arising in connection with the arrangement. Contractual risk allocation does not transfer regulatory responsibility.

Legal form. The FME must be a company, an LLP or another permitted form, and its memorandum of association or LLP agreement must enable it to offer third-party fund management services.

People. For each scheme managed under a third-party arrangement, the FME must appoint a dedicated principal officer responsible for that scheme’s fund management, risk management and compliance. For a Registered FME (Non-Retail), the compliance officer for its own schemes or PMS may also serve the third-party schemes. For a Registered FME (Retail), the compliance officer for retail schemes must be separate from the compliance officer for non-retail schemes, whether self-managed or third-party managed. AUM of third-party managed schemes counts towards the USD 1 billion threshold that triggers an additional fund-management KMP, excluding fund-of-funds AUM managed under third-party arrangements.

Capital. An FME authorised for this activity must maintain an additional net worth of USD 500,000 at all times, separate from and in addition to the net worth required for its own activities and for any other activities inside or outside the IFSC.

Scope and size. Only restricted schemes may be managed under a third-party arrangement, in accordance with Part B of Chapter III, and such a scheme may not exceed a corpus of USD 50 million, or such other value as IFSCA specifies.

Conflicts. The third party is deemed to be an associate of the FME for the purposes of the specified conflict-of-interest and contribution provisions in regulations 35(3), 35(4) and 40. The consequence is that dealings between the scheme and the third party attract the investor-approval requirements that apply to associate transactions, and the sponsor contribution rules apply accordingly.

Eligibility of the third party. The third party must be a third-party fund manager that is incorporated in India, the IFSC or a foreign jurisdiction; allocates adequate resources to discharge its functions; has persons with adequate and requisite experience responsible for those functions; and whose officers, directors, partners, designated partners, KMPs and controlling shareholders are fit and proper under regulation 9. An explanation makes clear that a third-party fund manager remains eligible even if its ultimate or interim parent is not engaged in fund management.

Choosing Between the Routes

Portfolio management and third-party fund management offer two distinct routes for Registered FMEs in GIFT IFSC. While the former focuses on managing individual client portfolios, the latter allows an IFSC manager to operate restricted schemes on behalf of another fund manager, subject to separate authorisation and additional compliance requirements.

Practical Observations

• Advisory-only mandates are treated differently. Several PMS requirements, including custody and the modes of holding client funds, are expressed to exclude FMEs providing only advisory services. The scope of the mandate should be defined precisely in the agreement.
• Third-party arrangements do not outsource liability. The regulation is explicit, and it should shape indemnity negotiations rather than be displaced by them.
• Watch the corpus cap. A restricted scheme under a third-party arrangement is capped at USD 50 million, which constrains the model’s use for large funds.
• Associate status has consequences downstream. Deemed associate status brings investor-approval requirements into transactions that might otherwise appear arm’s length.

Frequently Asked Questions

1. What is portfolio management services (PMS) in GIFT IFSC?

PMS allows a Registered FME to manage an individual client’s portfolio under a portfolio management agreement, subject to applicable regulatory requirements.

2. What is the minimum investment for PMS in GIFT IFSC?

An FME cannot accept funds or securities worth less than USD 75,000 from a client under a portfolio management agreement.

3. What is third-party fund management in GIFT IFSC?

It allows a Registered FME, with separate IFSCA authorisation, to launch and manage restricted schemes on behalf of an eligible third-party fund manager.

4. What additional net worth is required for third-party fund management?

An authorised FME must maintain additional net worth of USD 500,000, over and above the net worth required for its other activities.

5. What is the corpus limit for third-party managed schemes?

A restricted scheme managed under a third-party arrangement cannot exceed USD 50 million, or another limit specified by IFSCA.

6. Does an FME remain liable under a third-party fund management arrangement?

Yes. Regulation 107C(4) preserves the FME’s liability for obligations and liabilities arising from the arrangement, notwithstanding contractual provisions such as indemnities.

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The IFSCA (Fund Management) Regulations, 2025 allow investment schemes in GIFT City IFSC to be structured as a company, LLP or trust, subject to the applicable requirements. However, the choice of legal structure involves more than regulatory compliance. It can influence governance responsibilities, tax treatment, fiduciary duties and the rights of investors in a fund.

This article examines the legal and practical implications of using different structures for investment funds in GIFT IFSC. Rather than ranking companies, LLPs and trusts, it considers how each option may suit different investment strategies, investor requirements and exit plans.

What the Regulations Fix, and What They Leave Open

Three regulatory requirements are worth considering before choosing a legal form for an investment fund in GIFT IFSC.

The manager’s form is constrained. Under regulation 5, an FME may be a company, an LLP, a branch of either, or another permitted form, except that a Registered FME (Retail) may not be an LLP or a branch, and the branch route is open only to an entity already regulated for similar activities in India or abroad.

The scheme’s fiduciaries follow the form. Regulation 17 requires an FME, before filing a scheme document, to appoint fiduciaries: the board of directors for a company, designated partners for an LLP, or trustees, including the board of a trustee company, for a trust. All must satisfy fit-and-proper requirements, and for retail schemes their appointment requires IFSCA’s prior approval.

Family Investment Funds have their own list. An FIF may be a company, a contributory trust or an LLP, with express determinacy conditions where a trust is used (Article 20).

The Governance Consequence

The choice between different GIFT IFSC fund structures also affects how governance responsibilities are assigned.

• In a company, the board owes duties under the Companies Act, 2013 as modified for IFSC companies (Article 44), and the shareholders’ rights are statutory. Governance is the most codified of the three, and the most familiar to institutional investors.
• In an LLP, the designated partners carry statutory responsibility, and the internal arrangement is governed by the LLP agreement. Flexibility is greatest here, and correspondingly more depends on drafting.
• In a trust, the trustee holds assets for the beneficiaries. The Third Schedule to the Regulations sets out the trustee’s role and obligations, and the trust deed does the constitutional work. This is the structure most commonly used for private funds, but it places heavy weight on the deed and on trustee independence.

The Tax Consequence: The Pass-Through Boundary

The decisive tax question is not the vehicle’s form but whether it falls within a defined tax category.

Category I and II: pass-through. Section 224 of the Income-tax Act, 2025 provides that where a unit holder of an “investment fund” receives income out of investments made in the fund, that income is chargeable in the same manner as if the investments had been made directly by the unit holder. Business income is treated differently: losses under the head “profits and gains of business or profession” are carried forward and set off at fund level, and ignored for the pass-through.

Section 224(10)(a) defines “investment fund” as a fund established or incorporated in India as a trust, company, limited liability partnership or body corporate which holds a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the SEBI (Alternative Investment Funds) Regulations, 2012 or the IFSCA Fund Management Regulations. The form of the vehicle is therefore irrelevant to eligibility; the category is what matters.

Category III, retail schemes and ETFs: the specified fund route. These do not use section 224. Their treatment runs through Schedule VI and section 210 (Article 7): exemptions for defined categories of income, attributed to units held by non-residents, and special rates on the rest.

The vehicle still affects minimum tax. Under section 206, a company that is an IFSC unit deriving income solely in convertible foreign exchange pays MAT on book profit at 9%; a non-corporate IFSC unit, including an LLP, pays AMT at 9% on adjusted total income, which adds back deductions claimed (Article 6). For a vehicle claiming the section 147 deduction, the LLP route brings AMT squarely into play.

Trust taxation has its own architecture. Where a trust is used and the fund is not within section 224, the general law on the taxation of trusts and representative assessees applies, and determinacy of beneficiaries and their shares becomes important. That is one reason the Family Investment Fund conditions insist on identifiable beneficiaries and determinable shares.

A Summary Comparison

The main differences between company, LLP and trust structures for GIFT IFSC funds are summarised below, covering governance, tax treatment and regulatory requirements.

A Drafting Point Worth Noting

The Income-tax Act, 2025 refers, in section 224(10)(a) and in Schedule VI, to the IFSCA (Fund Management) Regulations, 2022. Those regulations were repealed by the 2025 Regulations. Regulation 148(4) of the 2025 Regulations provides that, after the repeal, any reference to the 2022 Regulations “in any other regulations made, guidelines or circulars issued thereunder by the Authority, any act of the Government of India or laws enacted by other statutory authorities” is deemed to refer to the corresponding provisions of the 2025 Regulations. Regulation 148(3) preserves registrations and approvals granted under the repealed regulations.

The practical effect is that a scheme authorised under the 2025 Regulations should be read as satisfying the statutory descriptions framed by reference to the 2022 Regulations. Whether a regulation made by IFSCA can, of its own force, govern the construction of a Central Act is a question of some nicety, and as at 17 September 2026 no judicial authority on the point was traced. Structures that depend on the characterisation should record the basis on which it is taken.

How the Choice is Usually Made in Practice

• Investor expectations often decide it. Institutional limited partners familiar with LP structures may prefer an LLP or trust; strategic or corporate investors may prefer a company.
• Category matters more than form for the tax outcome, so the category should be settled with the strategy, not after it.
• Retail ambitions foreclose options at the manager level, since a Registered FME (Retail) cannot be an LLP or branch.
• Exit mechanics differ: transfer of shares, assignment of LLP interest and transfer of units each raise different documentation, consent and, where relevant, stamp questions.

FAQs

1. Do the IFSCA (Fund Management) Regulations, 2025 require a specific legal form for a fund?
No. A scheme can be constituted in the IFSC as a company, LLP or trust. The Regulations are largely vehicle-neutral, but the choice still affects governance, tax and what investors own.

2. Can an LLP act as a Fund Management Entity (FME)?
Yes, except for a Registered FME (Retail), which cannot be an LLP or a branch.

3. Who are the fiduciaries of a fund under regulation 17?
It depends on the form: the board of directors for a company, designated partners for an LLP, and trustees for a trust. For retail schemes, their appointment needs IFSCA’s prior approval.

4. Does the vehicle’s form decide whether the fund gets pass-through taxation?
No. Under section 224 of the Income-tax Act, 2025, eligibility depends on the fund being a Category I or II AIF, not on whether it is a company, LLP or trust.

5. How are Category III funds, retail schemes and ETFs taxed?
They do not use section 224. They are taxed under the specified fund route (Schedule VI and section 210), with exemptions for defined income, attribution to non-resident unit holders, and special rates on the rest.

6. Does the vehicle affect minimum tax?
Yes. An IFSC company earning income solely in convertible foreign exchange pays MAT at 9% on book profit. An LLP pays AMT at 9% on adjusted total income.

7. Can a Family Investment Fund (FIF) be a trust?
Yes, as a contributory trust, subject to determinacy conditions (identifiable beneficiaries and determinable shares). A company or LLP is also permitted.

8. Which structure is best for a fund in the GIFT City IFSC?
There is no legal hierarchy. The right choice depends on the strategy, investor base, exit plans and intended fund category, which should be settled together at the outset.

The post Company, LLP or Trust? Choosing the Right Fund Structure in GIFT IFSC appeared first on Bhatt & Joshi Associates.

Retail schemes and exchange-traded funds (ETFs) in IFSC are subject to specific requirements under the IFSCA (Fund Management) Regulations, 2025. These cover who can manage a scheme, the number of investors it must have, investment and concentration limits, valuation, disclosure and ETF listing requirements.

Only One Category of Manager

Only a Registered FME (Retail) may launch retail schemes. That category carries the most demanding entry conditions in the regulations (Article 18): it cannot be an LLP or a branch; it must have at least four directors of whom at least half are independent and unassociated with the FME; it must satisfy an objective track-record test; it must appoint a dedicated fund-management KMP before filing the offer document for its first retail scheme or ETF; and its minimum net worth is USD 1 million.

The first protection, in other words, is at the level of the manager.

Retail Schemes: The Quantitative Architecture

Offer document and filing. A retail scheme may not be launched unless a draft offer document is filed with IFSCA with the applicable fee. The offer document is valid for twelve months from IFSCA’s communication that it has been taken on record, with a one-time six-month extension available on payment of 50% of the fee for a fresh filing. Material changes must be notified to IFSCA immediately. Unlike venture capital and restricted schemes, which use a green channel, a retail scheme’s document goes through the offer-document route.

Investor base. A retail scheme must have at least 20 investors, and no single investor may hold more than 25% of the scheme. This prevents a nominally retail scheme from operating as a private vehicle.

Liquidity of the portfolio. For an open-ended scheme, investment in unlisted securities may not exceed 15% of total AUM. A close-ended scheme that invests more than 15% in unlisted securities is subject to two conditions: the minimum investment by an investor is USD 10,000, and the scheme may not invest more than 50% in unlisted securities; both conditions are relaxed for specified investments by a close-ended retail scheme.

Concentration. A retail scheme may not invest more than 10% of AUM in the securities of a single company, extended to 15% with the specified approval; not more than 25% of AUM in a single sector, with a higher ceiling of 50% for the financial services sector; and not more than 25% of AUM in schemes of the FME itself or its associates, subject to disclosure of the underlying schemes in the offer document.

Scheme size. The minimum size of a retail scheme is USD 3 million. A scheme may launch on receiving at least USD 1 million and must reach USD 3 million within twelve months of IFSCA’s communication, failing which a one-time six-month extension may be obtained at 50% of the fresh filing fee.

Valuation and reporting. NAV must be disclosed to investors daily for an open-ended scheme, with a less frequent cycle for close-ended schemes as specified. The offer document must contain all material disclosures, including the investment objective, strategy, NAV disclosure practice, fees and expenses, conflicts of interest and risk management practices.

Read together, these provisions do the work that gating and redemption terms do in a private fund: they keep the portfolio liquid enough to meet redemptions, diversified enough to survive a single failure, and transparent enough for an investor to price an exit.

Exchange Traded Funds

ETFs are dealt with separately, and only a Registered FME (Retail) may launch one.

Listing is mandatory. An ETF must be listed and traded on a recognised stock exchange. Permitted categories are equity index based, debt index based, commodity based, hybrid (two or more asset classes), actively managed, and any other ETF approved by the exchange and IFSCA. The offer document may not be filed with IFSCA unless approved by the exchange, and for actively managed and “other” ETFs, prior approval of the exchange where listing is intended is required.

Identification. An ETF in the IFSC must use the identifier “IFSC ETF”, marking it as an ETF listed and traded in the IFSC.

Index quality rules. For an equity index based ETF, the index must have at least ten stocks; for a sectoral or thematic index, no single stock may exceed 35% weight, and otherwise no single stock may exceed 25%; and the ETF must replicate the index to at least 95% of total assets.

For a debt index based ETF, the index must have at least five issuers, no single issuer may exceed 25% weight, and constituents must be investment grade, with an exception for specified index-based funds. Replication must be at least 90%, with a limited allowance for deviation where issuances of an index constituent are unavailable.

For a commodity based ETF, at least 90% must be invested in the specified commodity, and the FME must have a KMP with the specified experience.

The regulatory technique here is indirect but effective: rather than policing the ETF’s portfolio continuously, the rules police the quality of the index it tracks and the fidelity with which it tracks it.

Where the Protections Sit, Compared with Non-Retail Schemes

Two Practical Observations

The manager’s own schemes are capped. The 25% limit on investment in the FME’s own or associate schemes is a structural conflict rule, not merely a disclosure item, and it applies at AUM level.

Custody sits elsewhere in the regulations. For portfolio management activity, regulation 78(7) requires an FME operating as a portfolio manager, other than one providing only advisory services, to appoint a custodian for securities managed or administered by it. Scheme-level custody, valuation and administration obligations should be read together with the general obligations chapter and the codes of conduct in the Third Schedule.

Frequently Asked Questions

1. Who can launch a retail scheme in IFSC?

Only a Registered FME (Retail) authorised under the IFSCA (Fund Management) Regulations, 2025 can launch a retail scheme.

2. What is the minimum size of a retail scheme?

The minimum scheme size is USD 3 million. A scheme may launch with at least USD 1 million and must reach the minimum within twelve months, subject to the prescribed extension.

3. How many investors must a retail scheme have?

A retail scheme must have at least 20 investors, and no single investor may hold more than 25% of the scheme.

4. What are the investment limits for retail schemes?

Retail schemes are subject to prescribed limits on unlisted securities, single-company exposure, sector concentration and investments in schemes managed by the FME or its associates.

5. Are ETFs permitted in GIFT IFSC?

Yes. A Registered FME (Retail) may launch an ETF, which must be listed and traded on a recognised stock exchange and comply with the applicable index, investment and disclosure requirements.

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family office is usually a service arrangement. A Family Investment Fund (FIF) in GIFT City IFSC is something more specific: a regulated fund vehicle that may pool money only from a single family, managed by a fund management entity registered for that purpose. The regulatory design accepts that a family’s own capital does not need the protections built for third-party investors, and adjusts the requirements accordingly, while keeping the structural discipline of a registered fund.

The Two Defining Concepts

“Family investment fund” is defined in regulation 2(1)(l) of the IFSCA (Fund Management) Regulations, 2025 as a fund pooling money only from a single family under one or more investment vehicles, set up in terms of the regulations.

“Single family” is defined broadly in regulation 2(1)(ii). It includes a group of individuals who are lineal descendants of a common ancestor, together with their spouses, including widows and widowers whether remarried or not, and their children, including stepchildren, adopted children and ex-nuptial children. It also includes entities, such as a sole proprietorship, partnership firm, company, LLP, trust or body corporate, in which an individual or a group of individuals of a single family exercises control and directly or indirectly holds substantial economic interest.

The definition therefore accommodates the way families actually hold wealth: through operating companies, holding vehicles and trusts, not only in individual names. Two tests must be satisfied for an entity to count: control by the family, and substantial economic interest held directly or indirectly.

The Manager: An Authorised FME

Under regulation 3(4), an FME set up by a Single Family to manage its Family Investment Fund registers in the Authorised FME category. That is the lightest of the three categories (Article 18), and it reflects the absence of third-party investors.

Two ordinary FME requirements are switched off for an FIF by regulation 104(2): the legal form requirements in regulation 5 and the net worth requirements in regulation 8 do not apply to a Family Investment Fund.

Legal Form of the Fund

An Family Investment Fund may be set up in the GIFT City IFSC as a company, a contributory trust, an LLP, or another form IFSCA permits. Where a trust is used, the regulations impose conditions designed to ensure determinacy:

• the beneficiaries must be identifiable from the trust deed, although they need not be named;
• each beneficiary’s share must be capable of being determined from the deed and must not be at the trustee’s discretion; and
• further contributors must not render existing beneficiaries unknown or their shares indeterminate.

These conditions track the concerns that arise under Indian trust and tax law where beneficiaries or their shares are indeterminate. A discretionary trust structure will not satisfy them.

The Economic Threshold

An FIF must have and maintain a minimum investment of USD 10 million within three years from the date of its certificate of registration. Where the family sets up additional investment vehicles, after filing documents with IFSCA and paying the applicable fee, those vehicles are considered in conjunction for the purpose of meeting this threshold.

The structure is therefore scalable. A family may operate several vehicles for different asset classes or branches of the family while satisfying a single aggregate threshold.

Open or Close-Ended, and What it May Invest in?

The FIF may be open-ended or close-ended, “depending upon the requirements of the family”. Its permissible activities are all activities related to managing the family investment fund, and such other activities as IFSCA specifies.

Permissible investments, in the IFSC, India or foreign jurisdictions, and in the manner and to the extent IFSCA specifies, cover:

• unlisted securities;
• securities listed, to be listed or traded on stock exchanges;
• money market instruments;
• debt securities;
• securitised debt instruments, asset-backed or mortgage-backed;
• units of investment schemes;
• derivatives, including commodity derivatives;
• limited liability partnerships;
• physical assets such as real estate, bullion and art; and
• other specified securities, financial products, assets or instruments.

Borrowing and leverage are permitted “as per their risk management policy”, without the express investor-consent mechanics that apply to restricted and venture capital schemes. That is a meaningful difference: the discipline is internal governance rather than external investor approval.

Characterisation for Tax and Exchange Control

An explanation to regulation 104 states that the FIF or its investment vehicle may be construed as a Category I, Category II or Category III Alternative Investment Fund depending on the investment strategy adopted in accordance with regulation 30. An amendment effective 10 September 2026 added that it “shall accordingly be taken on record by the Authority”.

The addition matters. Category characterisation drives treatment under the Income-tax Act and under exchange-control instruments that refer to AIF categories. Making the characterisation a matter of record with IFSCA reduces the scope for later disagreement about what the vehicle is. Whether a particular FIF qualifies as a “specified fund” for the purposes of Schedule VI of the Income-tax Act, 2025 remains a separate question, answered by that Schedule’s own conditions, including its unit-holding requirements (Article 7).

Family Office Services for Other Families

The FIF regime is confined to a single family. Where a manager wishes to serve several families, the route is different: regulation 81 permits an FME to provide services to a multi-family office under a portfolio management agreement, subject to conditions IFSCA may specify. That is a portfolio management activity available to a Registered FME (Non-Retail), not a Family Investment Fund.

Practical Points for Families Considering the Structure

• Map the family tree against the definition before assuming that all intended contributors qualify. Entities qualify only where the family has both control and substantial economic interest.
• Test the trust deed against the determinacy conditions at drafting stage if a contributory trust is used.
• Plan for the USD 10 million threshold across all vehicles, and diarise the three-year deadline from registration.
• Adopt a real risk-management policy, since it is the operative constraint on borrowing and leverage.
• Settle the AIF characterisation early, and keep it consistent with the strategy actually pursued, since IFSCA now takes it on record.
• Do not conflate the fund with the manager. The FIF is managed by an Authorised FME; the relaxations in regulation 104(2) apply to the fund, and the FME’s own obligations under the regulations continue.

Frequently Asked Questions

1. What is a Family Investment Fund (FIF) in GIFT City IFSC?

A Family Investment Fund is a regulated fund vehicle that pools money exclusively from a single family under the IFSCA (Fund Management) Regulations, 2025.

2. Who can set up a Family Investment Fund in GIFT IFSC?

A single family may establish an FIF through an FME registered in the Authorised FME category to manage the fund.

3. What is the minimum investment requirement for an FIF?

An FIF must achieve and maintain a minimum investment of USD 10 million within three years from the date of its certificate of registration.

4. What assets can a Family Investment Fund invest in?

Subject to IFSCA requirements, an FIF may invest in securities, debt instruments, derivatives, investment scheme units, LLPs and physical assets such as real estate, bullion and art.

5. Can a Family Investment Fund serve multiple families?

No. An FIF is restricted to a single family. Managers seeking to serve multiple families may explore the multi-family office framework under regulation 81, subject to applicable conditions.

6. Does an FIF automatically qualify for tax benefits in GIFT IFSC?

No. Tax treatment depends on the applicable provisions of the Income-tax Act, 2025, including the specific conditions for any claimed exemption or deduction.

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An IFSC Banking Unit in GIFT City may look like a conventional bank branch, but its regulatory framework is different. Governed by the International Financial Services Centres Authority (IFSCA), it operates under distinct rules for capital, liquidity, foreign currency accounts and depositor protection. Understanding these differences is essential for banks establishing an IFSC presence and businesses or individuals choosing to bank with an IFSC Banking Unit.

Two Legal Forms, Not One

The IFSCA (Banking) Regulations, 2020 use “Banking Unit” as the umbrella term, and since the 2023 amendments distinguish two forms:

• an IFSC Banking Unit (IBU): a Banking Unit licensed or permitted to operate as a branch of the Parent Bank; and
• an IFSC Banking Company (IBC): a Banking Unit licensed or permitted to operate as a subsidiary company of the Parent Bank.

A Parent Bank that has already set up an IBU may, with IFSCA’s prior approval, convert it into an IBC. The regulations also permit a Parent Bank to establish a Representative Office (marketing of financial products, data collection, outreach) or a Global Administrative Office (managing, administering or coordinating the Parent Bank’s or group entities’ operations, and providing support services), under a mechanism specified by IFSCA. Activities of a GAO relating to a jurisdiction outside the IFSC remain subject to the directions of that jurisdiction’s regulator.

A “Parent Bank” may be an Indian bank or a foreign bank. The unit’s licensing therefore begins with an existing bank, not with a new banking licence.

Entry Conditions for IFSC Banking Units in GIFT City

A foreign bank without a presence in India must comply with such additional requirements as IFSCA specifies. If IFSCA is minded to refuse, it must give thirty days for written submissions, and must communicate a rejection in writing with reasons.

The Prudential Perimeter

An IFSC Banking Unit in GIFT City differs from a domestic branch in its reserve, liquidity and depositor protection requirements.

Reserve requirements. Under regulation 8, the liabilities of an IBU, other than deposits raised from individuals resident in India or outside India, are exempt from the cash reserve ratio or such other requirements as IFSCA may specify. Deposits raised from individuals are subject to such reserve ratios as IFSCA specifies. An IBC, by contrast, must maintain reserves as mandated under the Banking Regulation Act, 1949 and the RBI Act, 1934.

Liquidity ratios at parent level. A Banking Unit must maintain the liquidity coverage ratio as specified; for an IBU, the ratio may be maintained by the Parent Bank with IFSCA’s prior approval. The same approach applies to the net stable funding ratio when made applicable. Leverage ratio and exposure ceiling norms are as specified by IFSCA from time to time.

Dual compliance for branches. Regulation 4(2) requires Banking Units, whether IBU or IBC, to follow IFSCA’s norms, and requires an IBU additionally to comply with the directions and instructions of its Parent Bank’s Home Regulator, unless IFSCA specifies otherwise. A branch in GIFT IFSC therefore answers to two rulebooks by design.

No lender of last resort. Regulation 9 states plainly that lender of last resort support is not available to a Banking Unit. Deposit insurance is available only to the extent provided under the Deposit Insurance and Credit Guarantee Corporation Act, 1961 and the rules or regulations under it. A depositor’s protections are therefore materially different from those attaching to a domestic branch deposit.

What a Banking Unit May Do

Regulation 13, as substituted in 2023, is drafted widely. A Banking Unit may undertake any or all of the activities mentioned in section 3(1)(e) of the IFSCA Act and section 6 of the Banking Regulation Act, 1949, except those expressly prohibited either by the Home Regulator of the Parent Bank or by IFSCA, subject to IFSCA’s terms, conditions and guidelines, including on design, execution and risk management. Providing “referral services”, as defined, is expressly declared a permitted activity.

This is a shift in drafting technique. The pre-2021 version enumerated activities: lending and trade finance, inter-bank borrowing and lending, investments, post-shipment export credit, factoring and forfaiting, equipment and aircraft leasing, a detailed list of derivative transactions including non-deliverable INR contracts, operating as a foreign portfolio investor, and acting as a trading or professional clearing member. The current text replaces the list with a general permission bounded by prohibitions. For an operating bank, the compliance question is therefore not “is this activity on the list?” but “has this activity been prohibited by IFSCA or by the home regulator, and what conditions has IFSCA specified for it?”

Currency and Accounts

Business must be conducted in the specified foreign currencies listed in the First Schedule. As amended in July 2024, the list comprises the US dollar, euro, Japanese yen, pound sterling, Canadian dollar, Australian dollar, Swiss franc, Hong Kong dollar, Singapore dollar, UAE dirham, Russian rouble, Norwegian krone and New Zealand dollar. Business in INR may be permitted with specified persons, subject to settlement in the specified foreign currencies.

On accounts:

• Banking Units may open accounts in specified foreign currencies for individuals and corporate or institutional entities, resident in India or outside India, subject to conditions.
• Resident individuals may open, hold and maintain accounts with a Banking Unit for transactions connected with permissible current or capital account transactions under the RBI’s Liberalised Remittance Scheme (see Article 12).
• Cash transactions in foreign currency accounts are not permitted.
• Individuals may hold current, savings or term deposits; other account holders may hold current or term deposits.
• An INR account is permitted, funded out of specified foreign currencies, to defray administrative and statutory expenses.
• A Banking Unit must maintain separate nostro accounts with correspondent banks, distinct from those of other branches of the same Parent Bank in India.

Books, records and reporting are in the specified foreign currencies, with reports to IFSCA in US dollars unless otherwise specified.

Supervision and Enforcement

AML, CFT and KYC obligations follow IFSCA’s guidelines rather than the RBI’s (Article 35). If a Parent Bank or Banking Unit fails to fulfil licence conditions, IFSCA may withdraw the licence after giving thirty days to make submissions, without prejudice to other action under the IFSCA Act.

The regulations also record their own transition: from their commencement, the RBI’s 2015 circular on IFSC Banking Units ceased to apply, while actions taken under it are preserved.

Why the Distinctions Matter Commercially

For a corporate customer, the practical consequences are that deposits sit outside the domestic deposit-protection expectations, that the account is denominated in a specified foreign currency, and that the counterparty’s prudential support may rest with a parent abroad.

For a bank, the choice between an IBU and an IBC is not merely tax or capital efficiency. It determines whether the unit is a branch subject to dual supervision with parent-level liquidity, or a separately capitalised company holding reserves under Indian banking legislation.

For both, regulatory authority now sits with IFSCA. Section 51A of the Banking Regulation Act, inserted by the IFSCA Act, withdraws the RBI’s powers under that Act in the IFSC to the extent of permitted financial products, services and institutions (Article 1). Questions that a domestic branch would put to the RBI are, in the IFSC, questions for IFSCA.

Frequently Asked Questions

1. What is an IFSC Banking Unit in GIFT City?

It is a banking establishment in GIFT IFSC regulated by IFSCA, operating as a branch or subsidiary of a Parent Bank.

2. What is the minimum capital requirement?

An IFSC Banking Unit requires USD 20 million, while an IFSC Banking Company requires USD 50 million, subject to IFSCA requirements.

3. Who regulates IFSC Banking Units?

The International Financial Services Centres Authority (IFSCA) regulates IFSC Banking Units.

4. Can resident Indians open accounts with IFSC Banking Units?

Yes, subject to applicable conditions under the RBI’s Liberalised Remittance Scheme (LRS).

5. Are IFSC Banking Unit deposits insured?

Deposit insurance applies only to the extent provided under applicable deposit insurance laws and regulations.

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GIFT IFSC is often described as having a “unified regulator”. That is accurate but incomplete. The International Financial Services Centres Authority (IFSCA) did not receive a new, self-contained code of financial regulation. What Parliament did in the International Financial Services Centres Authority Act, 2019 (the IFSCA Act) was more technical, and more consequential: it moved the powers of four Indian financial regulators under fourteen existing statutes to a single authority, but only within a defined territory and only for a defined subject-matter. Those two limits frame almost every legal question in GIFT IFSC.

Where the IFSCA Act, 2019 Applies: The Territorial Link to the SEZ Act

Section 2 of the IFSCA Act applies it to International Financial Services Centres set up under section 18 of the Special Economic Zones Act, 2005 (SEZ Act). Section 18(1) of the SEZ Act allows the Central Government to approve an IFSC in a Special Economic Zone, with a proviso that only one IFSC may be approved in any one SEZ.

Two consequences follow. First, IFSCA’s authority is territorial: it attaches to financial activity carried on by units in the IFSC, not to a financial activity simply because it is cross-border or denominated in foreign currency. Second, GIFT IFSC remains part of an SEZ. The SEZ Act, which under its section 51 also has overriding effect, continues to govern matters such as approval of units and their SEZ obligations. (Article 2 of this series examines what that dual character means for the legal status of an IFSC unit.)

The Transfer Mechanism: Section 13 and the First Schedule

The core of the IFSCA Act 2019 is section 13(1). “Notwithstanding anything contained in any other law”, all powers exercisable by an “appropriate regulator” under the Acts listed against it in the First Schedule are, in the IFSCs, to be exercised by IFSCA, in so far as they relate to the regulation of financial products, financial services or financial institutions.

The First Schedule lists four appropriate regulators and fourteen statutes:

Section 33 and the Second Schedule close the loop from the other side. Each parent statute was amended to insert a provision (for example, section 51A of the Banking Regulation Act, section 28C of the SEBI Act and section 44A of FEMA) stating that the parent regulator’s powers under that Act “shall not extend” to an IFSC and “shall be exercisable by” IFSCA, in so far as the regulation of financial products, services and institutions permitted in the IFSC is concerned. Both provisions came into force on 1 October 2020 under a Ministry of Finance notification of 29 September 2020.

The drafting is deliberate. IFSCA does not simply acquire a parallel power; within the IFSC, the parent regulator’s power is withdrawn to the same extent.

Procedure Travels with Power

Section 13(4) ensures that procedure follows substance. It provides that the provisions of the First Schedule statutes on:

• the manner of applying for, or withdrawing, recognition or registration, and furnishing information;
• inspection, investigation, prosecution, settlement, compounding, adjudication, and the filing of appeals arising from these; and
• the determination and recovery of fees, fines and penalties,

apply mutatis mutandis to financial products, services and institutions under the IFSCA Act.

In practice, this means the enforcement architecture of the parent statute generally follows the activity. A question about how a penalty on a securities-market intermediary in the IFSC is adjudicated or appealed is therefore answered by reading the relevant parent statute through section 13(4), together with IFSCA’s own regulations. It is not answered by the IFSCA Act alone. (Article 4 considers enforcement and appeals in detail.)

Section 13(5) adds a distinctly IFSC feature: penalties, fines, fees and settlement amounts are collected in the foreign-currency equivalent. The conversion uses the RBI reference rate on the date of the order. Under section 13(6), sums realised as penalties or fines are credited to the Consolidated Fund of India in rupees.

Defining the Perimeter: “Financial Product” and “Financial Service”

The subject-matter limit is set by section 3(1). “Financial product” covers securities, contracts of insurance, deposits, credit arrangements, certain foreign currency contracts, and anything the Central Government notifies. “Financial service” is defined through fourteen sub-clauses, from dealing and deposit-taking to advice and payment services, again with a residual power of notification.

That residual power has been used to widen the perimeter well beyond conventional finance. Examples include:

• aircraft leases (including operating, financial and hybrid leases) as a financial product, and Global In-house Centres as a financial service (notifications of 16 October 2020);
• book-keeping, accounting, taxation and financial crime compliance services as financial services (notification of 18 January 2024). These are subject to conditions that the providing units must not be formed by splitting up, reconstructing or reorganising a business already in existence in India, and must not take over existing contracts or work arrangements from group entities in India;
• operating leases of specified oilfield equipment, specified by IFSCA through a notification dated 5 January 2026 issued under an earlier Central Government notification of 14 December 2021 that enabled operating leases of products or equipment.

Whether IFSCA regulates an activity can therefore turn on a Gazette notification rather than on the Act itself.

What the IFSCA Act, 2019 Does Not Do?

Three limits deserve emphasis, because commercial summaries often blur them.

It does not displace Indian law generally. Section 30 gives the IFSCA Act overriding effect only against inconsistent provisions. Laws outside the First Schedule continue to apply in the IFSC unless they are modified. Examples include company law, income-tax, GST, insolvency, arbitration, anti-money-laundering and data-protection legislation. Section 31 lets the Central Government disapply or modify other Central Acts for IFSC financial products, services and institutions. That power has a parliamentary safeguard: a draft of the notification must be laid before both Houses for thirty days. Absent such a modification, or a modification under the relevant Act’s own enabling power, the general law governs.

It transfers the powers of regulators, not of the Central Government. Section 13 and the Second Schedule speak of powers exercisable by the RBI, SEBI, IRDAI and PFRDA. Rule-making powers that a parent statute vests in the Central Government are not, on the text, transferred to IFSCA. FEMA is the most significant example.

Its carve-out is limited to the IFSC. Each Second Schedule provision withdraws the parent regulator’s powers only “in so far as” the regulation of financial products, services and institutions permitted in the IFSC is concerned. On the text, the parent regulator’s jurisdiction over persons outside the IFSC is not displaced merely because those persons deal with an IFSC entity. For example, rules governing an Indian resident’s outward remittance continue to come from the RBI and the Central Government. Several articles in this series (notably Articles 12, 13 and 50) turn on this boundary.

Other Structural Provisions Worth Knowing

• Currency (section 20): financial-services transactions in an IFSC are to be in the foreign currency IFSCA specifies by regulations, in consultation with the Central Government.
• Policy directions (section 21): IFSCA is bound by the Central Government’s written directions on questions of policy.
• Parliamentary oversight (sections 28–29): every IFSCA regulation must be laid before Parliament, which may modify or annul it.
• Composition (section 5): the RBI, SEBI, IRDAI and PFRDA each nominate an ex officio member of IFSCA.

Commencement

The Act received assent on 19 December 2019 but commenced in stages: IFSCA was established on 27 April 2020 (head office, Gandhinagar); sections 12, 17–26, 28, 31 and 32 commenced on 21 August 2020; and sections 13 and 33 on 1 October 2020.

A working Method

For any GIFT IFSC question, three steps usually locate the governing law:

1. Is the activity a notified or defined financial product or service carried on by an IFSC unit? If so, IFSCA regulations, and the parent statute as applied through section 13, are the first port of call.
2. Is a Central Government instrument involved? If so (for example, FEMA rules or a section 31 modification), the Government instrument governs, not IFSCA.
3. Is the question outside the First Schedule altogether? Tax, company, insolvency and arbitration questions are examples. If so, the general Indian statute applies unless it has been specifically modified for the IFSC.

As of 17 September 2026, the statutory text described above remains unamended. Much of the regulatory substance, however, now sits in IFSCA’s regulations, which change frequently.

Frequently Asked Questions

1. What is the IFSCA Act, 2019?

The IFSCA Act, 2019 establishes a unified regulator for financial products, services and institutions operating in International Financial Services Centres (IFSCs).

2. What are the main powers of IFSCA under the Act?

Under Section 13, IFSCA exercises specified regulatory powers of the RBI, SEBI, IRDAI and PFRDA within IFSCs.

3. Does the IFSCA Act override all Indian laws?

No. It overrides inconsistent provisions only to the extent provided by the Act. Other Indian laws continue to apply unless specifically modified.

4. Which laws fall under IFSCA’s regulatory authority?

The First Schedule covers 14 statutes relating to banking, securities, insurance, pensions and other financial activities.

5. Does IFSCA regulate all cross-border financial transactions?

No. Its jurisdiction depends on the activity, the IFSC territorial boundary and whether the activity falls within the defined or notified financial products and services.

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