CAM Comment: This article is crucial for legal, fintech, and business leaders as it unveils how the IFSCA PSP License at IFSC, GIFT City empowers cross-border payment service providers to operate globally from within India. By offering a unified regulatory framework, tax incentives, and foreign exchange flexibility, it positions IFSC as a strategic hub for building scalable, efficient, and globally aligned payment infrastructures.
India’s evolving regulatory landscape is creating new legal pathways for the global payment infrastructure to be built locally. At the heart of this transformation is India’s first and maiden International Financial Services Centre (IFSC) in Gujarat International Finance Tec-City (GIFT City), a notified Special Economic Zone (SEZ), established in 2015. Under the aegis of the International Financial Services Centres Authority (IFSCA), it aims to provide a business-friendly regulatory regime at par with leading global financial centres, such as DIFC, ADGM, and Singapore.
Over the past decade, India has steadily advanced its regulatory approach to digital payments. A major milestone was the Reserve Bank of India’s (RBI) Circular on Regulation of Payment Aggregator Cross Border (PA- CB Circular), issued on October 31, 2023, bringing all entities facilitating online cross-border transactions for the import and export of goods and services under its purview as Cross-Border Payment Aggregators (Cross-Border PAs),to enable seamless cross-border payments.
Building on this, IFSC-GIFT City has created a regulatory environment that empowers payment service entities to operate with minimal foreign exchange restrictions, while adhering to IFSCA’s robust standards. This proactive framework mitigates operational and compliance risks and safeguards consumer interests, reinforcing trust and transparency in international transactions. IFSC’s regulatory architecture complements the offshore leg of cross-border payment flows, allowing entities to deliver true end-to-end payment solutions—from initiation to settlement—within a unified and efficient ecosystem.
IFSC-GIFT City and the IFSCA PSP License: A Legal Innovation
Stationed territorially, IFSC is India’s gateway to offshore global financial services and products, serving as a platform to “onshore the offshore” business, i.e., undertake offshore transactions from within India. It is regulated by IFSCA—a unified regulator for all financial services, products, and regulated entities in the IFSC. While uniquely developing financial services, products, and institutions within the IFSC, the IFSCA also multitasks for Indian financial sector regulators such as the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDAI), and Pension Fund Regulatory and Development Authority (PFRDA), in the IFSC jurisdiction.
In 2024, IFSCA notified the IFSCA (Payment Services) Regulations, 2024 (IFSCA PSP Regulations),[1]and the IFSCA (Payment and Settlement Systems) Regulations, 2024 (IFSCA PSS Regulations)[2]. The IFSCA PSP Regulations permits a PSP to conduct a broad range of cross-border payment activities, including:
- account issuance service (including e-money account issuance service);
- e-money issuance service;
- escrow service;
- cross border money transfer service; and
merchant acquisition services.Enabled from within India, these activities benefit from regulatory treatment that mimics global offshore centres, thereby allowing PSP providers to adopt more liberalised approach, to facilitate such cross-border activities.
Legal and Structural Advantages
From a legal perspective, the IFSCA PSP Regulations introduce a distinct construct outside the purview of RBI and FEMA, allowing greater flexibility in structuring international payment businesses with streamlined compliance processes.
The key advantages include:
- Simplified Regulatory Regime: Unlike in mainland India, where the RBI, SEBI, IRDAI, and PFRDA oversee different financial services, within GIFT City, IFSCA is a single-window regulator for all financial activities—a light-touch regulator providing principle-based regulations. This reduces administrative overhead, enhances regulatory clarity, and enables ease of doing business.
- Sandbox-Driven Innovation: The IFSCA has introduced a robust regulatory sandbox to allow fintech innovators to test new business models in a controlled environment—particularly useful for exploring embedded finance, cross-border e-commerce payouts, and multi-currency wallets without facing immediate licensing roadblocks. Initially, IFSCA’s FinTech Framework was the gateway for cross-border payment service providers to engage with the IFSC ecosystem in a controlled and compliant manner. Despite a dedicated regulatory regime, PayTech firms may still leverage the FinTech Sandbox to pilot novel cross-border transaction models, experiment with emerging technologies, and collaborate with regulators to shape future-ready payment infrastructure.
- Global Regulatory Alignment: The IFSCA PSP Regulations are modelled after matured international regimes such as Singapore’s Major Payment Institution (MPI) license,[3] the UK’s Electronic Money Institution (EMI) license,[4] and Hong Kong’s Stored Value Facility (SVF)[5] regime, making it legally compatible with global financial partners.
- Deemed offshore status: As IFSC is considered “non-resident” from a foreign exchange norms’ perspective, an investment from a jurisdiction outside India into IFSC will be treated as a non-resident-to-non-resident transaction, and India’s foreign exchange provisions will not apply.
- Enhanced Control Over Foreign Exchange Management: PSPs operating within IFSC benefit from exemptions under FEMA and its regulations, allowing for greater flexibility in structuring cross-border transactions. Coupled with IFSC’s light-touch regulatory approach, PSPs can deliver cost-effective and time-efficient solutions. This enhanced regulatory environment enables the implementation of global payment structures, such as netting arrangements, pre-funding mechanisms, and other innovative models, driven by the greater control over foreign exchange flows available within the IFSC framework.
- Reduced Friction in Cross-Border Transactions: Despite introducing a localised payment and settlement framework for IFSC transactions, IFSCA has clarified that offshore payment systems not facilitating local IFSC transactions do not need to register with it.[6] This provides PSPs with the flexibility to leverage offshore payment systems or global payment networks, either as part of an integrated solution or through strategic partnerships with multiple service providers. In contrast, the domestic Indian regime mandates that all cross-border transactions be routed through an Authorised Dealer Category-I (AD-I) bank, which increases bank-led dependency. The IFSC approach is expected to significantly reduce friction in executing cross-border transactions, enhancing cost and time efficiency for PSPs and their clients. Further, unlike in mainland India, the regime in IFSC does not impose caps on transaction amounts or restrict the nature of permissible transactions undertaken by PSPs—subject, of course, to compliance with Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) requirements. This added flexibility enhances the scalability and global competitiveness of payment solutions offered from IFSC.
- Undertaking business in specified foreign currency: Business can be undertaken in (i) US Dollar (USD); (ii) Euro (EUR); (iii) Japanese Yen (JPY); (iv) UK Pound Sterling (GBP); (v) Canadian Dollar (CAD); (vi) Australian Dollar (AUD); (vii) Swiss Franc (CHF); (viii) Hong Kong Dollar (HKD); (ix) Singapore Dollar (SGD); (x) UAE Dirham (AED); (xi) Russian Rouble (RUB); (xii) Swedish Krone (SEK); (xiii) Norwegian Krone (NOK); (xiv) New Zealand Dollar (NZD); and/or (xv) Danish Krone (DKK). Additionally, IFSCA permits IFSC entities to defray their administrative expenses in Indian Rupees (INR).
- Tax and regulatory attractiveness: An entity operating out of the IFSC has various direct and indirect tax incentives, including the following: (i) 100 per cent tax exemption on business income of the IFSC entity for 10 consecutive years out of the first 15 years; (ii) Minimum Alternate Tax (MAT) charged @ 9 per cent of book profits and applies to a company / others set up as a unit in IFSC(not applicable to companies in IFSC opting for the new tax regime); (iii) No Goods and Services Tax charged on an IFSC entity on services received by it in the IFSC and/ or services provided to IFSC / SEZ units/ offshore clients
Strategic Takeaways for Legal and Business Leader
For PSPs, IFSC-GIFT City presents legal and strategic opportunities, enabling the development of a globally integrated payments business.
The IFSCA PSP Regulations aim to complement, not replace, the RBI’s PA of PA-CB licenses. Given India’s position as the most populous country and one of the largest developing economies, cross-border PSPs may adopt dual operational structures—leveraging IFSC-GIFT City for international payment flows and RBI-licensed entities for domestic operations. This reduces PSPs’ reliance on traditional payment rails, which are often inefficient for low-value transactions in today’s fast-paced, globally connected environment.
Many leading Indian banks have established their first offshore banking presence in IFSC-GIFT City, making it a strategic gateway to the Indian market—even for PSPs operating solely within the IFSC framework. This introduces multiple avenues for cross-border transactions, including partnerships with banks that lack offshore capabilities elsewhere. By anchoring operations in GIFT City, PSPs gain exposure to the entire Indian diaspora and business ecosystem, enabling them to serve diverse payment needs across geographies with enhanced efficiency and reach.
Conclusion: A Legal Gateway to Global Scale
IFSC-GIFT City represents a paradigm shift in India’s financial regulatory architecture, moving beyond being a policy sandbox to becoming a legitimate legal and commercial alternative for companies looking to scale cross-border payments infrastructure from within India.
For those willing to invest in the right legal, tax, and operational setup, IFSC-GIFT City can serve as a springboard into global markets—combining Indian innovation with international legal robustness.
For further information, please contact:
Ketaki Gor Mehta, Partner, Cyril Amarchand Mangaldas
ketaki.mehta@cyrilshroff.com
[1] ps-regulations-final-consolidated-final23042024043055.pdf
[2] International Financial Services Centres Authority
[3] Section 6 of the Payment Services Act, 2019 (Payment Services Act 2019 – Singapore Statutes Online ).
[4] FCA Electronic Money Regulation 2011 and Payment Institutions Regulations, 2017 Electronic money and payment institutions | FCA.
[5] Hong Kong Monetary Authority – Stored Value Facilities and Retail Payment Systems.
[6] IFSCA Circular Participation of Payment Service Providers (“PSPs”) in international payment systems dated June 6, 2025
