The International Financial Services Centres Authority (“IFSCA”) is the unified regulator of India’s maiden International Financial Services Centre (“IFSC”) at Gujarat International Finance Tec-City (“GIFT City”). Uniquely positioned both as a developer the regulator for the IFSC jurisdiction, the IFSCA is tasked with fostering a robust financial ecosystem, regulating financial products, financial services, and financial institutions while promoting ease of doing business. A critical aspect of its objective is enforcing compliance requirements and ensuring that IFSC, GIFT City, maintains its status as a jurisdiction of “substance”, with its regulatory standards on par with other global centres.
IFSCA’s role vis-à-vis enforcement framework
As the unified regulator for the financial products, financial services, and financial entities within IFSC, GIFT City, the IFSCA has the distinct mandate to develop, regulate, supervise, and govern the financial ecosystem within the IFSC jurisdiction. As a super regulator, it is empowered to perform the functions of multiple Indian financial sector regulators, including the Reserve Bank of India (“RBI”), Securities and Exchange Board of India (“SEBI”), Insurance Regulatory and Development Authority of India (“IRDAI”), and the Pension Fund Regulatory and Development Authority (“PFRDA”) within the IFSC jurisdiction. As part of its regulatory and governance function, IFSCA is also empowered to conduct investigations/inspections/examinations and take relevant enforcement actions, including issuing advisories, warning letters, imposing penalties, and, in severe cases, cancelling licenses.
Enforcement Trends
| Entity | Enforcement Action by IFSCA |
| Warning Letters/Orders | |
| Ancillary Service Provider | In October 2024, IFSCA issued a warning letter to PGB Smart Accounts LLP on providing professional services to service recipients not fulfilling the criteria laid down in Section 1(E)[1] of the Framework for Ancillary Services dated February 10, 2021 (“Ancillary Service Framework”). The warning letter directed the ancillary service provider to: Going ahead, not to render services to service recipients not falling under Section 1(E) of the Ancillary Services Framework;Not to claim any tax/other benefits for transactions carried out with service recipients not fulfilling the criteria under Section 1(E) of the Ancillary Services Framework, and if such tax/other benefits are already claimed, the same needs to be paid back to the tax authority of India and a subsequently intimate IFSCA of the same. |
| Fund Management Entity | In May 2025, IFSCA issued a warning order to Neo Asset Management Private Limited (IFSC Branch) (“FME”) for absent of necessary manpower, i.e., the principal officer and the key managerial personnel during surprise visits carried out by IFSCA. Basis the show-cause notice, as issued by IFSCA and the hearings, the FME promised to take the necessary corrective actions to remedy such non-compliance with the regulation – i.e., ensuring full presence of the principal officer and the key managerial personnel at their IFSC, GIFT City office – and, going forward, ensure full compliance with the regulatory requirements. Accordingly, IFSCA issued an Order warning the FME to be compliant with the relevant man-power requirements, stating that any further non-compliance would result into stricter action, including cancellation of the certificate of registration granted to the FME. |
| Cancellation of license/authorisation | |
| Finance Company (Aircraft Lessor) | In July 2024, IFSCA issued an order against Darwin Platform Aircraft Leasing and Financing IFSC Limited, cancelling its registration as a finance company undertaking aircraft operating lease activities on account of the following non-compliances: Failure to infuse of required minimum capital of USD 0.2 million and failure to submit the certificate from its statutory auditor confirming such infusion;Failure to intimate the date of commencement of operations as per its certificate of registration;Failure to file mandatory documentation with IFSCA and failing the on-site assessment conducted by IFSCA;Office being closed and no officials being present during the surprise visits by IFSCA; andNon-cooperation with IFSCA and failure to respond to multiple notices as sent by IFSCA via email. |
| Insurance Broker | In February 2025, IFSCA issued an order against Prowess Insurance Brokers Private Limited (“PIBPL”), cancelling the IFSCA authorisation permitting PIBPL to operate as branch office in IFSC, GIFT City. IFSCA had the following observations as reasons for the cancellation of PIBPL’s authorisation: Engagement in fresh insurance business (through sourcing) for a period of two (2) years despite specific instructions from IFSCA to not undertake new business, given PIBPL’s IRDAI approval had expired on September 21, 2021, and was further pending renewal from IRDAI as on January 2022; Engagement in activities of re-insurance business for its client without having the relevant license/registration for the same despite authorisation to undertake only direct insurance; andWrongful booking of remuneration received towards re-insurance commission/brokerage from foreign re-insurer as risk management fees in its audited statements. |
Analysis
These aforementioned IFSCA advisories served as prompts for voluntary compliance, while the warnings signaled escalation for non-compliance. Such actions underscore IFSCA’s commitment to ensuring that IFSC, GIFT City, is a jurisdiction for genuine transactions, where operational presence in both form and substance complies with regulatory expectations in letter and in spirit, preventing entities from solely operating for tax benefits/arbitrage. A critical enforcement tool at IFSCA’s disposal is its authority to revoke licenses/authorisations. Such enforcement actions typically occur when entities, despite warnings and opportunity for course correction, repeatedly or deliberately violate regulatory and compliance requirements or engage in activities that undermine the IFSC’s integrity.
Impact and Outlook
The IFSCA’s enforcement actions reflects a balanced approach, combining strict oversight with a flexibility to support the growth of IFSC, GIFT City, as a global financial hub. The issuances of advisories and warnings demonstrate a preference for corrective measures, fostering compliance without stifling growth and invocation. IFSCA’s readiness to escalate actions such as cancellation of license/registration/authorisations signals its commitment to maintaining high standards.
The aim of such enforcement actions is to enhance transparency, increase investor protection and confidence, and ensure alignment with global standards to become a preferred financial hub. With major foreign and domestic financial institutions setting up their operations in IFSC, GIFT City, IFSCA’s supervisory and regulatory role to ensure compliance will be pivotal in sustaining its reputation as a premier financial destination.
As a developer, IFSCA’s growth trajectory has been tremendously successful, with more than 700 entities now registered in IFSC, GIFT City, across various financial sectors. While IFSC, GIFT City, has been a jurisdiction of substance and form from the outset itself, achieving full compliance has been challenging for many entities. As IFSCA moves towards regulatory supervision and oversight, its ability to balance its role as a developer and an enforcer will be crucial. The future will hinge on the IFSCA’s ability to effectively balance development and governance – ensuring that IFSC, GIFT City, continues to thrive as a global hub and maintains strict compliance with regulatory standards.
For further information, please contact:
Abhileen Chaturvedi, Partner, Cyril Amarchand Mangaldas
abhileen.chaturvedi@cyrilshroff.com
[1] Service providers can provide permissible services to any one or more of the following: (i) Entity(ies) set up in the IFSC;
(ii) Entities from foreign jurisdictions for various permissible ancillary services in the IFSCs in India or overseas; (iii) Indian entities who propose to open, set up or carry out operations in IFSCs or foreign jurisdiction, provided consideration is received in freely convertible foreign currency;
