The International Financial Services Centres Authority (IFSCA) has published a set of Frequently Asked Questions on how banks operate in GIFT City IFSC. The FAQs cover the IFSCA (Banking) Regulations, 2020 (as amended), the IFSCA Banking Handbook, and IFSCA's circulars on internet banking for clients of IFSC Banking Units (IBUs).
This guide summarises what the FAQs say: how an IBU is set up, who must govern it, what it can do, the prudential ratios it must maintain, the fees it pays, KYC rules, related structures like the Global Administrative Office and Representative Office, and seven clarifications on internet banking.
What the IFSCA Banking FAQs Cover
The document is split into two sections:
- Section I (General): 16 questions on establishment, the Banking Handbook, governance, permissible activities, prudential requirements, fees, AML-CFT/KYC, the Global Administrative Office (GAO) and the Representative Office (RO).
- Section II (Internet banking): 7 questions clarifying IFSCA's circular on internet banking services to clients of IBUs dated April 2, 2024, and the review circular dated December 29, 2025 (as amended).
Key Takeaways at a Glance
| Topic | What the FAQs say |
| Legal form | An IBU is a branch of the parent bank |
| Licence | Licence from IFSCA, applied for by the parent bank on the Single Window IT System (SWIT) portal |
| Minimum capital | Parent bank maintains regulatory capital for the IBU, minimum USD 20 million |
| Home regulator | No Objection Letter from the parent bank's home regulator |
| Governing Body | Appointed before operations begin, with at least 3 members |
| Approved Individuals | CEO/Head-IBU and Compliance Officer at all times |
| Minimum LCR | 100 per cent |
| NSFR | Not yet specified by IFSCA |
| RDRR | 3 per cent of deposits raised from individuals, maintained daily |
| Leverage Ratio | Quarterly certificate signed by an authorised official of the parent bank |
| Fees | Application fee, licence fee and annual recurring fee |
| KYC | IFSCA (AML, CFT and KYC) Guidelines, 2022 (as amended); third-party reliance allowed with conditions |
1. Setting Up an IBU in GIFT City
Permitted legal form
At present, a Banking Unit in IFSC may be set up as a branch of the parent bank. This branch is called an IFSC Banking Unit (IBU).
Licence and the SWIT portal
A bank needs a licence from IFSCA to set up a Banking Unit in an IFSC. The parent bank applies on IFSCA's Single Window IT System portal.
Requirements for the licence
Under regulation 3 of the IFSCA (Banking) Regulations, 2020 and module 1 of the Banking Handbook: General Directions, the applicant must meet these requirements:
- Capital: the parent bank undertakes to maintain regulatory capital for the IBU's operations, subject to a minimum of USD 20 million (or another level IFSCA may specify). This capital is held at the parent bank.
- No Objection Letter: the parent bank obtains a No Objection Letter from its home regulator for setting up the IBU.
- Liquidity undertaking: the parent bank ensures the IBU has access to liquid assets and financial resources adequate for the nature, size and complexity of its business.
- Home-regulator compliance: the parent bank complies, and will continue to comply, with its home regulator's prudential requirements.
- Reporting: the parent bank shares with IFSCA the capital adequacy, liquidity risk and leverage ratio reports it submits to its home regulator.
- Breach notification: if it breaches CRAR, LCR, NSFR or Leverage Ratio requirements set by its home regulator, it notifies IFSCA immediately with relevant documents.
Banks with no presence in India
A bank that has no presence in India can also apply to set up an IBU. In addition to the requirements above, it must meet section 22(3A) of the Banking Regulation Act, 1949, and the additional conditions in para 6 of the Banking Handbook: General Directions. IFSCA may seek the opinion of the Government of India, or a body it has set up, before deciding.
2. The IFSCA Banking Handbook
IFSCA's detailed guidelines for IBUs are in the IFSCA Banking Handbook, available on IFSCA's website under About us > Legal framework > Circular. It has three parts:
| Component | What it covers |
| General Directions (GEN) | Licensing of IBUs, "controlled" and "designated" functions, approved/authorised individuals, broad principles for banking business and IFSCA's supervisory functions |
| Conduct of Business Directions (COB) | Minimum standards of conduct, especially treatment of clients and dealings with counterparties and other market participants, and market integrity in IFSC |
| Prudential Directions (PRU) | The home regulator's prudential guidelines apply unless IFSCA specifies otherwise; the Handbook adds minimum non-quantitative prudential requirements |
3. Governance and People
Governing Body
The Governing Body is the structure responsible for oversight of the IBU's operations. The bank must appoint it before the IBU starts operations and inform IFSCA in writing. It must have at least 3 members. Its composition is set out in para 2(1), and its duties in para 5, of module 2 of the General Directions.
Approved Individuals
An Approved Individual is an IBU employee working out of IFSC whom IFSCA has approved to carry out specific functions. These positions must be held by an Approved Individual at all times:
- CEO / Head-IBU
- Compliance Officer
- Any other role or function IFSCA may direct from time to time
Indian laws and FEMA
Unless specifically exempted, all domestic laws of India apply to IFSC, and banks may consider getting a legal opinion on how individual laws apply to their IBU. Transactions with persons resident in India are subject to the Foreign Exchange Management Act, 1999 (FEMA).
4. What an IBU Can Do
An IBU may undertake any or all of the activities under clause (e) of sub-section (1) of Section 3 of the IFSCA Act, 2019 and Section 6 of the Banking Regulation Act, 1949. The exceptions are activities explicitly prohibited by the parent bank's home regulator or by IFSCA, and all activities are subject to the terms and conditions IFSCA specifies.
Outsourcing guidelines for IBUs are in para 3 of the module on Systems and Controls in the General Directions of the Banking Handbook.
5. Prudential Requirements for IBUs
IBUs must comply with prudential ratios including the Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR) and Leverage Ratio (LR). Because the regulations also allow retail banking, IBUs must also maintain a Retail Deposit Reserve Ratio (RDRR).
| Requirement | What IBUs must do |
| LCR | Maintain on a standalone basis at the higher of the home regulator's minimum or IFSCA's level; current IFSCA minimum is 100 per cent; may be kept at parent level with IFSCA permission |
| NSFR | Same standalone rule as LCR; IFSCA has not yet specified an NSFR requirement |
| Leverage Ratio | Minimum LR under the Basel Framework maintained by the banking company; quarterly certificate signed by an authorised official of the parent bank |
| RDRR | 3 per cent of deposits raised from individuals, outstanding at the end of the previous working day, maintained daily |
| Prudential reports | Copy of reports submitted to the home regulator also submitted to IFSCA |
The RDRR can be held in any specified foreign currency, either as a balance in the IBU's nostro account or as sovereign debt securities (including T-bills) rated investment grade or above by at least two international rating agencies. Prudential reporting formats are on IFSCA's website under Downloads > Banking.
6. Fees for Setting Up an IBU
A bank setting up an IBU pays three categories of fee:
- A one-time application fee, paid with the application
- A one-time licence fee, paid after receiving in-principle approval
- A recurring annual fee, based on the IBU's annual turnover
The amounts are set out in IFSCA's circular "Fee structure for the entities undertaking or intending to undertake permissible activities in IFSC or persons seeking guidance under the Informal Guidance Scheme" dated March 2, 2026.
7. AML, CFT and KYC Rules
IBUs must comply with the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 (as amended).
IBUs may rely on a third party for KYC, to the extent and on the conditions set out in those guidelines. Chapter VI of the guidelines covers third-party reliance on Customer Due Diligence.
8. Related Structures: GAO and Representative Office
Global Administrative Office (GAO)
A GAO is a financial institution set up in IFSC by a bank that manages, administers or coordinates the operations of the parent bank or group entities, or provides them with support services, either in IFSC or outside it. Details are in Module 17 of the Conduct of Business Directions.
A GAO must be in IFSC but not on the same or contiguous premises as the same bank's branch, unless IFSCA specifically permits it. A bank with an existing IBU that wants a GAO must seek approval to broad-band the activities of its existing SEZ unit (the IBU). The GAO's resources, including the Head-GAO and other staff, must be kept separate from the IBU and from any Representative Office.
Representative Office (RO)
A bank incorporated in India or outside India may set up a Representative Office in IFSC under section 3(9) of the IFSCA (Banking) Regulations, 2020. An RO may undertake the activities listed in para 6 of module 12 ("Representative Office") of the Conduct of Business Directions.
9. Internet Banking: 7 Clarifications for IBUs
Section II of the FAQs explains requirements in IFSCA's internet banking circulars for IBU clients:
| Question | IFSCA's answer |
| Do live market rates include card rates? | No. Platforms show prevailing market rates with the spread applied, not card rates. Under the June 30, 2026 amendment this display is now non-mandatory |
| Are statements limited to CSV, JSON and XML? | No. These are only examples; any other machine-readable format may be offered, guided by customer needs |
| What is white-listing for fintech partners? | The IBU may give a fintech partner access to selected APIs for purposes like account verification and payments |
| What are auto-scheduled payouts? | Customers can set up automated payout schedules; the IBU proceeds subject to verification and prescribed procedures |
| What are validation tools? | IBUs may, to the extent feasible, use third-party tools to catch issues such as incorrect account numbers and currency mismatches |
| How is user access managed for corporate current accounts? | User access management, including Master User access, may follow the bank's policy |
| Does registration consent apply to new customers? | No. Explicit consent for registering or deregistering internet banking applies only to existing customers |
About this summary
This article summarises IFSCA's FAQs on the IFSCA (Banking) Regulations, 2020 (as amended), the IFSCA Banking Handbook and the circulars on internet banking. It is for general information only. For the exact requirements, refer to the original FAQs, regulations and circulars on IFSCA's website.
Read the original FAQs: IFSCA Banking FAQs (PDF)
Frequently Asked Questions
What is an IFSC Banking Unit (IBU)?
An IBU is a branch of a parent bank set up in an International Financial Services Centre such as GIFT City. At present, a Banking Unit in IFSC may be established as a branch of the parent bank.
What is the minimum capital for an IBU?
The parent bank must undertake to maintain regulatory capital for the IBU's operations, subject to a minimum of USD 20 million or another level IFSCA may specify. The capital is held at the parent bank.
Can a foreign bank with no presence in India set up an IBU?
Yes. It must meet the standard licence requirements, section 22(3A) of the Banking Regulation Act, 1949, and the additional conditions in para 6 of the Banking Handbook: General Directions.
What is the minimum LCR for an IBU?
IFSCA currently prescribes a minimum Liquidity Coverage Ratio of 100 per cent. IBUs must maintain the higher of this and their home regulator's minimum. IFSCA has not yet specified an NSFR requirement.
What is the RDRR for IBUs?
The Retail Deposit Reserve Ratio is 3 per cent of deposits raised from individuals, outstanding at the end of the previous working day, maintained daily in a specified foreign currency.
Final Takeaway
IFSCA's Banking FAQs bring the key rules for IBUs into one place. An IBU is a branch of its parent bank, licensed through the SWIT portal, backed by at least USD 20 million of regulatory capital at the parent and a No Objection Letter from the home regulator.
Once operating, it needs a Governing Body of at least 3 members, Approved Individuals in the Head-IBU and Compliance Officer roles, a minimum LCR of 100 per cent and an RDRR of 3 per cent on individual deposits. On internet banking, the FAQs give IBUs flexibility: live market-rate display is now non-mandatory, statement formats are open, and user access can follow bank policy.
