Navigating GIFT City: Understanding the IFSCA Circular for Finance Companies

Introduction to GIFT City and Regulatory Changes

As India’s International Financial Services Centres (IFSCs) like GIFT City continue to emerge as significant global finance hubs, regulatory clarity and procedural transparency are becoming essential. Recognizing this need, the International Financial Services Centres Authority (IFSCA) released a comprehensive circular on July 1, 2025. This circular offers structured guidance on how Finance Companies (FCs) and Finance Units (FUs) should submit requests that require prior approval or intimation.

This blog post breaks down the circular’s core guidelines, helping you navigate regulatory changes easily. It provides practical examples, whether you’re setting up a derivatives desk, surrendering a license, or restructuring your firm.

What Is the Circular About?

The circular aims to standardize the way Finance Companies and Finance Units in IFSCs:

• Seek approvals for significant business or structural changes.

• Inform the Authority about developments like name changes or activity expansions.

• Request exemptions or waivers from existing regulatory requirements.

  
  

The Authority has included an Annexure with a Guidance Note, detailing documents required for each scenario. This makes compliance simpler and more predictable.

Categories of Regulatory Requests Explained

The IFSCA classifies requests into six major types. Here’s how they work:

1. Change in Management or Control

What It Means:

A change in control (≥20% of shareholding or key decision-making) requires prior approval.

Required Documents:

• Request letter, Board Resolution

• New shareholding and group structure

• Details of promoters and UBOs

• ‘Information on Management’ form (Appendix I)

• Proof of fee payment (SWIFT/MT103)

  
  

✅ Example: A fund acquiring a 25% stake in an existing finance company must first obtain IFSCA's approval with proper documentation.

2. Change in Name

Required Documents:

• Intimation letter, Board Resolution

• Certificate of Incorporation with new name

• Revised Letter of Approval (if applicable)

• Proof of fee payment

  
  

✅ Example: A company rebranding from “ABC Lending Ltd.” to “ABC FinTech Ltd.” must notify IFSCA.

3. Broad Banding of Activities

What is "Broad Banding"?

This refers to expanding into new financial services, either within FC Regulations or under different IFSCA regulatory frameworks.

Two Cases:

| Case | Example | Documentation |

|------|---------|---------------|

| Case 1 | Lending firm adds factoring | Revised business plan, KMP experience, approvals |

| Case 2 | Lending firm adds investment advisory (under a different regulation) | Apply for NoC, then provide proof of license/registration |

4. Voluntary Surrender of Registration

What’s Needed:

• Reasons for withdrawal (Appendix II Form)

• Proof of activity cessation

• Client/stakeholder notifications

• Status of complaints and investigations

• Record retention and ROC strike-off plans

  
  

✅ Example: A firm exiting IFSC operations must prove it's ceased activities and notified all clients.

5. Requests for Waivers/Exemptions

Covered Areas:

• FC Regulation compliance

• Aircraft/Ship leasing frameworks

• GRCTC employee norms

• Trade finance platform rules

• Fee waivers

  
  

What to Submit:

• Formal request + supporting documents

• Fee payment receipt

  
  

✅ Example: A startup may seek a 1-year exemption from the minimum number of employees required for a GRCTC.

6. Other Requests

Handled on a case-by-case basis by the relevant IFSCA division (mostly under Banking Supervision).

What Is the Information on Management (IOM) Form?

Appendix I includes a form collecting detailed info on new promoters, directors, and UBOs:

| Key Fields | Examples |

|------------|----------|

| Name, DOB, PAN | Personal identity details |

| Experience | Work in financial services |

| Legal History | Defaults, disqualifications |

| Other Roles | Directorships or CEO roles in other firms |

| Credit Report | Adverse remarks, if any |

💡 IOM helps IFSCA determine "fitness and propriety" without bias, based on complete disclosure.

What Is the Voluntary Surrender Form?

Appendix II must be filled by companies choosing to exit IFSC operations. It verifies:

• Compliance with permitted activities

• Stakeholder protection

• Closure of complaints

• Recordkeeping and legal status

• Strike-off plans (if applicable)

  
  

Role of India INX and Connection to SOP

While this circular doesn’t mention derivatives explicitly, it affects companies operating in segments like India INX’s derivatives market. They may:

• Add or surrender trading services (requires broad banding or withdrawal).

• Change management (triggering compliance checks).

• Seek waivers for technical staffing or margin systems in early stages.

  
  

India INX as a Global Gateway:

• Offers 24x6 trading in global derivatives.

• Integrates risk, margin, and settlement mechanisms.

• A natural venue for IFSC-registered firms expanding services.

  
  

Common Derivative Products on India INX:

| Product | Underlying | Usage |

|---------|------------|-------|

| Equity Index Futures | Global indices | Hedging/Speculation |

| Currency Derivatives | USD-INR | FX risk management |

| Commodity Futures | Gold, Brent | Portfolio diversification |

Infographic: Document Matrix by Request Type

| Request Type | Prior Approval | Intimation Only | Form/Annexure |

|--------------|----------------|-----------------|----------------|

| Change in Management (>20%) | ✅ | ❌ | Appendix I |

| Change in Management (<20%) | ❌ | ✅ | Appendix I (if UBO changes) |

| Change in Name | ❌ | ✅ | — |

| Broad Banding (Same Regulation) | ✅ | ❌ | — |

| Broad Banding (New Regulation) | ✅ | Follow-up Intimation | License Copy |

| Voluntary Surrender | ✅ | ❌ | Appendix II |

| Waivers/Exemptions | ✅ | ❌ | — |

Fee Submission Process

• Processing fees must be paid via SWIFT/MT103, and a copy should accompany every request.

• Fees align with the IFSCA Fee Circular dated April 8, 2025.

  
  

Final Takeaways

| 💡 Insight | 📌 Summary |

|------------|------------|

| SOP Scope | Standardizes all change/approval requests for IFSC finance entities |

| Compliance Required | For core and non-core activity firms alike |

| Two Appendices | Appendix I (IOM), Appendix II (Voluntary Surrender) |

| Fee Norms | SWIFT/MT103 proof required |

| Link to Derivatives | Impacts firms trading or managing risk via India INX |

| Ease of Doing Business | Provides clarity, predictability, and transparency |

📎 Download Links

• Official Circular & Guidance Note (IFSCA)

  
  
  
  

If you want to explore more about GIFT City and how GIFT CFO can assist you in setting up, growing, or investing in this dynamic environment, Book a 1:1 call to explore GIFT City!