Mandatory Dematerialisation of Securities for IFSC Entities: A Game Changer for GIFT City

Background – Why Mandatory Dematerialisation of Securities for IFSC Entities Move Matters

GIFT City’s International Financial Services Centre (IFSC) is fast evolving into a global financial gateway — hosting banks, fund managers, insurance firms, fintechs, and capital market players.

However, despite having a fully developed depository and market infrastructure ecosystem in the IFSC, many entities established within GIFT City still obtain International Securities Identification Numbers (ISINs) and hold their securities with domestic depositories in India.

To align practices with global norms and bring regulatory coherence, the International Financial Services Centres Authority (IFSCA) has released a Consultation Paper on Dematerialisation of Securities by Entities in IFSC Jurisdiction.

This proposal seeks to ensure that all securities issued by entities in IFSC are dematerialised only with a depository registered under IFSCA (such as India International Depository IFSC Ltd).

📜 What the Draft Proposals say?

• Mandatory Dematerialisation through IFSC Depository

All IFSC-registered entities must obtain ISINs from a depository registered with IFSCA, not from domestic (onshore) depositories in India. This aligns with the fact that securities issued in IFSC are treated as foreign securities under FEMA regulations.

• Timeline for Migration

Entities that have already dematerialised securities through domestic depositories must migrate to an IFSC depository by March 31, 2026. This ensures a smooth transition period for all market participants.

• Flexibility for International Listings

Entities can still use International Central Securities Depositories (ICSDs) for global listings and issuance — maintaining access to global investors while complying with IFSC regulations.

• Depository Responsibilities

Depositories in IFSC will:

• Ensure seamless migration with minimal disruption to issuers and investors.

• Provide clear guidance on account opening, migration steps, and documentation.

• Submit compliance reports to IFSCA by April 30, 2026 confirming full migration.

IFSCA’s Broader Objective

This proposal aligns with IFSCA’s consistent efforts to:

• Promote ease of doing business in the IFSC.

• Deepen financial market infrastructure within GIFT City.

• Reduce regulatory fragmentation between onshore and offshore frameworks.

• Strengthen transparency and investor protection by ensuring all IFSC-issued securities are managed within a unified regulatory perimeter.

Impact on GIFT City Stakeholders

1. Fund Managers and Financial Service Providers

• FMEs, banks, insurers, and brokers will now have a single-point depository relationship under IFSCA.

• This enables faster settlement, reconciliation, and reporting for international investors.

• Consolidation under IFSCA depositories reduces cross-jurisdictional complexity and compliance costs.

2. Investors (Domestic, NRI, and Global)

• Enhanced transparency and standardisation of security holdings.

• Investors benefit from a simplified process when dealing with securities issued in IFSC.

• Increased confidence in the integrity and governance of the IFSC capital market ecosystem.

3. Depositories and Market Infrastructure Institutions

• The move strengthens the role of IIDI - India International Depository IFSC Ltd.(IIDIL) as the central backbone of the IFSC’s securities ecosystem.

• It fosters global interoperability — enabling linkages with ICSDs like Euroclear or Clearstream, while maintaining IFSCA oversight.

4. GIFT City Ecosystem

• The change positions GIFT City as a self-contained global financial hub, capable of handling listing, issuance, clearing, settlement, and custody — all within its regulatory boundary.

• Encourages foreign issuers and multinational financial institutions to route capital market transactions through GIFT IFSC.

Strategic Takeaway

By Mandatory Dematerialisation of Securities for IFSC Entities & centralizing dematerialisation within IFSC-registered depositories, IFSCA is laying the foundation for a stronger, more globally aligned capital market ecosystem. It’s a step toward complete financial market independence for GIFT City, ensuring global investors see it as a trusted and transparent jurisdiction — on par with Singapore, Dubai, and Luxembourg.

Next Steps

IFSCA has invited public and stakeholder comments on this proposal until November 16, 2025.Suggestions may be sent to:📧 saurabh.kumar1@ifsca.gov.in | pawan.kc@ifsca.gov.in | arjun.pd@ifsca.gov.in

Disclaimer

This article provides a simplified overview of IFSCA’s Consultation Paper on Dematerialisation of Securities by Entities in IFSC Jurisdiction (dated October 27, 2025).It is intended for educational and informational purposes only and does not constitute legal, financial, or investment advice. Readers should refer to the official IFSCA document at www.ifsca.gov.in and seek professional guidance before making any compliance or business decision.