JSA Newsletter | IFSCA | May and June 2026 Edition

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The International Financial Services Centres Authority (“IFSCA/Authority”), India’s unified regulator for International Financial Services Centres (“IFSCs”), is focused on developing a world-class financial hub at the country’s first IFSC, Gujarat International Finance Tec-City (“GIFT City”). IFSCA conducted the Corporate Treasury Conference 2026, on April 29-30, 2026, at GIFT City bringing together over 250 (two hundred and fifty) participants from corporate treasury offices, banks, and fintechs from India and around the globe. The conference featured deliberations focused on topics including GIFT IFSC’s transition from a finance hub to a treasury hub, treasury governance trends, developments in cross-border payments, treasury technology advancements, and the Foreign Currency Settlement System. On May 1, 2026, IFSCA issued the circular to all financial institutions on Frequently Asked Questions (“FAQs”) Regarding Annual Return on Foreign Liabilities and Assets under Foreign Exchange Management Act, 1999.

Further, to discuss the growing role of GIFT IFSC in strengthening ease of doing business for India’s international trade and commerce ecosystem, the Authority conducted a high-level meeting [1]. The discussions focused on leveraging the GIFT IFSC framework to facilitate global capital flows, international trade financing, and development of a robust cross-border financial ecosystem. A stakeholder consultation meeting was also held with industry members representing banks, bullion, leasing, fund management entities, International Trade Finance Services platforms, factoring companies, Indian Institute of Foreign Trade, and other trade finance entities.

In a major step forward for digital onboarding, the National Payments Corporation of India extended access to its e-Know Your Customer Setu platform to all Regulated Entities (“REs”) operating within the IFSC at GIFT City[2]. This initiative enables secure, Aadhaar-based digital identity verifications through a single-window onboarding interface, allowing REs to validate client Aadhaar information while enhancing operational efficiency and eliminating the need to physically store or process sensitive client information.

Further, IFSCA, vide circular dated May 20, 2026, issued the updated framework for ship leasing (originally issued on August 16, 2022), consolidating amendments made through various circulars. The updated framework consolidates provisions relating to registration through the Single Window IT System (“SWITS”), permissible activities including operating lease, voyage charters, asset management support services, and sale and leaseback transactions, as well as additional requirements for carrying out permissible activities by finance companies as lessors. The updated framework also includes the provisions relating to restrictions on transfer of ownership from persons resident in India to IFSC entities and guidelines for utilisation of office space or manpower by lessors undertaking ship leasing activity. The consolidated framework for ship leasing is accessible here.

IFSCA released comprehensive FAQs on the FinTech Sandbox Framework, 2026 on June 10, 2026. The Framework provides eligible entities a controlled environment to develop and test innovative fintech solutions, superseding all earlier sandbox-related circulars including the FinTech Entity Framework, 2022 and the Framework for Regulatory Sandbox, 2020. The FAQs detail the 4 (four) types of sandboxes available:

FinTech Regulatory Sandbox;
FinTech Innovation Sandbox;
Inter-Operable Regulatory Sandbox; and
Overseas Regulatory Referral Mechanism

The FAQs outlines the eligibility criteria, a two-stage application process, evaluation parameters, testing stage obligations, financial requirements, and exit and revocation procedures. Applicants may develop and test solutions linked to capital markets, banking, insurance, pension, metals and commodities, and other permitted segments. Operationally, testing can run for up to 12 (twelve) months (with a possible 6 (six)month extension), and applicants usually do not need a physical office in GIFT City unless they handle live customer money through local bank accounts. While entities running live tests must submit brief monthly progress reports and keep records for 7 (seven) years, those using the Innovation Sandbox enjoy relaxed rules since they test in isolation without live market risks.

This edition of the May-June 2026 Newsletter captures the key regulatory developments aim to reinforce GIFT IFSC’s role as a dynamic and competitive international financial centre. Notably, these developments underscore IFSCA’s commitment to enhancing GIFT IFSC’s position as a global financial hub through regulatory reforms, sector-specific initiatives, and strategic engagements.

IFSCA (Finance Company) (Amendment) Regulations, 2026

IFSCA, vide notification dated May 5, 2026 (published in the official gazette on May 7, 2026), has amended the IFSCA (Finance Company) Regulations, 2021. Some of the key amendments are as follows:

Introduction of the concept of an SPV: The term ‘Special Purpose Vehicle’ (“SPV”) has been defined to mean a finance company incorporated or administered or both, by a Trust and Company Service Provider (“TCSP”), in such manner as may be specified by IFSCA, for undertaking permissible activities.
Definition of a TCSP: The term ‘TCSP’ has been defined to mean an entity authorised under the IFSCA (TechFin and Ancillary Services) Regulations, 2025, to provide TCSP services.
Leasing and financing activities through SPVs: The Schedule to the IFSCA (Finance Company) Regulations, 2021, which sets out the requirements applicable to each permissible activity or category of activities, has been amended to include leasing or financing activities undertaken by an SPV. The minimum owned fund, or paid-up share capital requirement will be equivalent to the amount prescribed under the Companies Act, 2013, or such other amount as may be specified by the Authority. Therefore, SPVs are exempted from complying with Regulation 4 (containing prudential requirements relating to capital adequacy, liquidity coverage and counterparty exposure limits) and Regulation 8 (containing IFSCA’s corporate governance and disclosure requirements) of the IFSCA (Finance Company) Regulations, 2021. This materially reduces the capital cost and ongoing regulatory burden of establishing separate SPVs for individual assets or transactions.

This amendment facilitates the use of transaction-specific SPVs for leasing and financing activities in GIFT IFSC, with lower capital requirements and exemptions from certain prudential and governance norms. This is expected to reduce structuring and compliance costs, enable better ring-fencing of assets and liabilities, and enhance lender confidence, while retaining oversight through authorised TCSPs and IFSCA.

IFSCA (TechFin and Ancillary Services) (Amendment) Regulations, 2026

IFSCA, vide notification dated May 5, 2026 (published in the official gazette on May 7, 2026), has amended the IFSCA (TechFin and Ancillary Services) Regulations, 2025.The amendment inserts Chapter VA, establishing a dedicated regulatory framework for TCSPs providing services in connection with leasing activities permitted by IFSCA.

The amendment covers registration, legal form of the applicant and eligibility, permissible services, governance and control, appointment of principal officer and compliance officer, eligible services recipients, reporting requirements, action in case of default, professional indemnity insurance and conflict of interest framework. Further, the Fifth Schedule is inserted dealing with services undertaken by TCSP for leasing activities permitted by IFSCA.

Subsequently, on May 20, 2026, IFSCA issued a guidance clarifying that IFSC Banking Units (“IBUs”) may avail voice broking services from entities registered as TechFin and Ancillary Service Providers under the IFSCA (TechFin and Ancillary Services) Regulations, 2025, provided such entities are authorised to offer voice broking services and the banking units continue to comply with the conditions prescribed under Module 5 of the IFSCA Banking Handbook: Conduct of Business Directions.

This amendment complements the amendments made to the IFSCA (Finance Company) Regulations, 2021 by creating a regulated TCSP framework for establishing and administering leasing-related SPVs in GIFT IFSC, subject to prescribed governance and compliance safeguards. The separate guidance provides regulatory clarity that IBUs may use registered TechFin and Ancillary Service Providers for voice-broking services, subject to the applicable Banking Handbook conditions.

Consumer Charter by REs in IFSCs

To strengthen consumer protection and ensure market integrity in the IFSC, IFSCA, vide circular dated May 8, 2026, has published the Consumer Charter (“CC”). The CC sets out IFSCA’s vision and mission for protecting the interests of financial consumers and outlines their rights and responsibilities. All REs dealing with retail consumers are encouraged to develop and publish their CCs on their GIFT IFSC entity websites or provide a link on their websites which redirects consumers to a dedicated webpage of any of their group entities elsewhere in the world. Further, the CCs must contain, inter-alia, the vision, mission, rights and responsibilities, essential do’s and don’ts for the consumers and other consumer-centric provisions based on the nature of their business, operational model, product complexity and delivery channels, to ensure fair, transparent and responsible conduct. Essential Do’s and Don’ts outlined for retail consumers emphasise verifying the IFSCA registration status of entities before transacting, safeguarding digital login credentials and PINs, promptly notifying REs of unauthorised transactions, and avoiding unverified cross-border financial solicitations. Alternatively, REs may also consider suitably adopting the IFSCA CC with relevant modifications based on their business activities.

Implementation services by investment advisers in the IFSC

IFSCA, vide circular dated May 12, 2026, has clarified that ‘implementation services’ under the IFSCA (Capital Market Intermediaries) Regulations, 2025 refer to services involving execution or operational facilitation of investment advice provided to clients. IFSCA has specified the following permissible channels through which such services may be offered depending on the nature of the financial product:

for securities listed on foreign exchanges, services are required to be routed through a global access provider or introducing broker in the IFSC;
for products listed within IFSC exchanges, execution is required to occur through registered exchange members; and
for unlisted products, arrangements are required to be made with regulated platforms or asset management companies in foreign jurisdictions.

Master Circular for Broker Dealers and Clearing Members

IFSCA, vide press release dated May 12, 2026, has issued a Master Circular for Broker Dealers and Clearing Members (“Master Circular”) consolidating all earlier circulars governing these intermediaries in the IFSCs. The Master Circular is organised across 11 (eleven) chapters covering the full lifecycle of a broker dealer or clearing member, from registration and eligibility through ongoing supervision, technology and conduct obligations, to surrender of registration. Key highlights of the Master Circular include streamlined registration through SWITS, governance standards, risk-based supervisory framework, tiered system audit framework, client asset protection and technical glitches framework.

Clarification on the fee structure applicable to existing ancillary service providers and existing TechFin entities

IFSCA, vide circular dated May 21, 2026, has clarified that the fee structure prescribed under the circular dated March 2, 2026, for TechFin and ancillary services providers will also be applicable to all existing ancillary service providers and TechFin entities that continue to operate under the transitional arrangements provided under the IFSCA (TechFin and Ancillary Services) Regulations, 2025, until the grant of registration. Further, a one-time relaxation has been granted whereby the applicable fees for the financial year 2026-27 may be paid to IFSCA on or before May 31, 2026, in the manner specified in the earlier fee circular.

Advisory on heightened cyber security risks arising from frontier artificial intelligence models

IFSCA, vide circular dated June 4, 2026, has issued an advisory addressing the escalating cyber security threats posed by advances in frontier artificial intelligence models, which can identify zero-day vulnerabilities, generate working exploits, and compress the window between vulnerability disclosure and exploitation from weeks to hours. REs are directed to strengthen their security posture proactively, in accordance with the principle of proportionality, and to reassess their cyber security risk set out in Annexure A of the circular.

Reporting format and norms for annual compliance audit for Capital Market Intermediaries in IFSC

To ease the process of conducting and submitting the annual audit report by the Capital Market Intermediaries (“CMIs”), to the Authority, IFSCA, through a circular dated June 5, 2026, has prescribed the reporting format and norms for the annual compliance audit. Some of the key provisions are as follows:

all CMIs must submit the Annual Compliance Audit Report (“ACAR”) along with the Annual Compliance Audit Checklist (“ACAC”) to IFSCA by September 30 each year for the preceding financial year;
the ACAC must contain a checklist of general obligations and responsibilities for all CMIs (Part-A), and a checklist of specific obligations based on the category of registration or authorisation (Part-B);
a copy of the ACAR along with ACAC must be submitted by the CMIs to their respective Market Infrastructure Institutions (“MIIs”);
MIIs will provide a checklist for the purpose of auditing compliance with applicable laws as prescribed in Part-C; and
the annual audit of Global Access Provider and Introducing Brokers for Global Access activities must be reported as a part of ACAR in the format specified under Part B.

IFSCA (Managing General Agents) Regulations, 2026

IFSCA, vide press release dated May 11, 2026, approved the draft IFSCA (Managing General Agents) Regulations, 2026. The proposed framework seeks to establish a comprehensive regulatory structure for the registration, conduct, operation and supervision of Managing General Agents (“MGAs”) operating in the IFSCs in India, which possess delegated authority from foreign insurer(s) for underwriting direct insurance business or settlement of claims.

Subsequently, on June 12, 2026, IFSCA has issued the IFSCA (Managing General Agents) Regulations, 2026, ensuring that the MGAs operate with transparency and accountability to protect policyholders’ interests and support the orderly growth and development of the insurance ecosystem in the IFSCs. Some of the key provisions of the regulations are as follows:

MGAs may be set up either as branches of foreign entities or as companies incorporated in the IFSCs, subject to the prescribed eligibility requirements. Foreign insurers must meet the prescribed financial thresholds including minimum net worth of USD 100,000,000 (US dollars one hundred million), credit rating of ‘A’ or equivalent, and satisfactory regulatory track record, and must not be from Financial Action Task Force high-risk jurisdictions;
MGAs are permitted to undertake direct insurance business from within the IFSC and outside India. Further, business is to be carried out in specified foreign currencies only;
no person must act as an MGA without obtaining a certificate of registration from IFSCA, which is granted after assessment of financial strength, governance standards, fit and proper criteria, operational capability, infrastructure, and policyholder protection considerations, and may include in-principle approval followed by final registration upon compliance;
MGAs are permitted to undertake underwriting, risk selection, product design, policy issuance, policy lifecycle management, solicitation, and claims management (where specifically delegated), but must operate strictly within the scope of their binding authority agreement and regulatory conditions, and are generally restricted from soliciting business in India’s Domestic Tariff Area except as permitted by law;
MGAs must maintain minimum capital of USD 500,000 (United States dollars five hundred thousand) (paid-up or assigned, depending on structure) and minimum net worth of USD 250,000 (United States dollars two hundred fifty thousand) or 50% of capital (whichever is higher), along with mandatory professional indemnity insurance and prescribed financial security deposits with IBUs. However, an MGA in branch form is permitted to maintain net worth at its parent level;
all premiums and claims handled by MGAs must be routed through segregated fiduciary accounts maintained with IBUs, with strict use limitations, monthly remittance requirements, and a cap on retention of client funds generally not exceeding three months of estimated claims and related expenses; and
foreign insurers retain supervisory oversight over MGAs, including mandatory half-yearly on-site reviews, annual audits, actuarial certification of reserves, and limits on delegated exposure (not exceeding 10% of gross written premium), along with restrictions on management interlocks.

Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026

RBI, vide notification dated June 18, 2026, has amended the Foreign Exchange Management (Deposit) Regulations, 2016 to provide greater flexibility in the operation of Special Non-Resident Rupee (“SNRR”) accounts and to incorporate provisions relating to IFSCs. Some of the key changes are as follows:

Recognition of IFSCs: The term “IFSC” has been defined by reference to the International Financial Services Centres Authority Act, 2019.
Expanded eligibility for SNRR accounts: Any person resident outside India may open, hold and maintain an SNRR account with an authorised dealer in India or its branch outside India. The provision also expressly covers branches located in an IFSC in India. Significantly, the earlier requirement that the non-resident must have a “business interest in India” has been removed.
Permissible transactions: SNRR accounts may be used for undertaking permissible current and capital account transactions with persons resident in India, in accordance with Foreign Exchange Management Act, 19999, as well as bona fide transactions with persons resident outside India.
Transfers from NRO accounts: Transfers from a Non-Resident Ordinary (“NRO”) account to a Non-Resident External (“NRE”) account or an SNRR account have been permitted within the limits as detailed out under Regulation 4 of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. Corresponding amendments have been made to Schedules 1, 3 and 4 of the Foreign Exchange Management (Deposit) Regulations, 2016.
Transactions between non-residents: Transactions between persons resident outside India involving SNRR accounts, which may not be subject to compliance under FEMA or the rules and regulations framed thereunder, may be effected by an authorised dealer based on the account holder’s instructions or mandate specifying the underlying purpose of the transfer.

The amendment materially broadens access to and the utility of SNRR accounts by removing the “business interest in India” eligibility requirement, facilitating transfers from NRO accounts and expressly accommodating IFSC branches. It is expected to reduce operational friction in rupee-denominated cross-border transactions and promote wider use of the Indian rupee, while retaining applicable FEMA, KYC and transaction-verification requirements.

Exempting certain entities/activities from the applicability of IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022

IFSCA, vide circular dated June 19, 2026, has amended the circular on ‘Exempting certain entities/activities from the applicability of IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022’ dated November 18, 2024 (“Exemption Circular”). Clause 3 of the Exemption Circular is modified to include all financial institutions, to transact or receive the monetary consideration emanating from the business transactions only through an account maintained with a banking unit in an IFSC or SNRR account (previously SNRR account were not included). An FAQ was issued regarding the applicability of IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022.

Consequently, IFSCA, vide circular dated June 19, 2026, has amended the circular regarding the ‘Permissible transactions through the SNRR accounts of IFSC units – Amendment’ dated January 29, 2025. Some of the key amendments are as follows:

a unit set up in an IFSC are permitted to open an SNRR account with an authorised dealer in India (outside an IFSC) for business-related transactions outside the IFSC;
a financial institution may receive or transact monetary consideration arising from business-related transactions outside the IFSC through the SNRR account;
amounts received in the SNRR account must be remitted to an account maintained with an IBU in a specified foreign currency within 30 (thirty) working days from receipt; and
the requirement of remittance will not apply to amounts credited for meeting administrative expenses.

This Newsletter has been prepared by: