GIFT CITY Update February 2026
05 Jan 2026: SCA Updates AML, CFT and KYC Guidelines: Consolidated Version Issued (January 2026)
The International Financial Services Centres Authority (IFSCA) has issued a circular dated January 02, 2026, introducing modifications to the International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022.
These changes have been notified following representations received from various stakeholders and market participants, and with the objective of providing greater regulatory clarity while aligning with relevant Government directives.
Key Developments
- Revised AML, CFT and KYC Provisions: The circular titled “Modifications under the International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022” outlines updates aimed at clarifying existing requirements and strengthening compliance frameworks within IFSC entities.
- Consolidated Guidelines Issued: To facilitate ease of reference, IFSCA has consolidated all amendments issued to date and published a comprehensive version titled:
“IFSCA (AML, CFT and KYC) Guidelines, 2022 – updated as on January 02, 2026”.
This document supersedes earlier versions and serves as the single reference point for regulated entities. - Clarifications on Video-based Customer Identification Process (V-CIP):
To address interpretational issues and ensure uniform implementation, IFSCA has also issued Frequently Asked Questions (FAQs) covering the intent and scope of specific provisions related to V-CIP. These FAQs are available under Point VI of the document titled “Frequently Asked Questions (FAQs) on International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022”.
Why This Matters
The updated framework reinforces IFSCA’s commitment to maintaining robust AML/CFT standards in IFSCs while offering greater operational clarity to regulated entities. Market participants are advised to review the consolidated guidelines and FAQs carefully and align their internal policies and procedures accordingly.
21 Jan 2026: IFSCA Proposes Comprehensive Framework for Algorithmic Trading in IFSC
International Financial Services Centres Authority (IFSCA) has released a consultation paper dated January 21, 2026, proposing a detailed regulatory framework for algorithmic trading on stock exchanges in IFSCs. The move aims to strike a balance between encouraging market innovation and safeguarding market integrity amid the growing dominance of high-speed, automated trading systems.
Why Regulation Now?
Algorithmic trading-ranging from basic order-slicing programs to complex, high-frequency, multi-asset strategies-has become a major driver of global market liquidity. However, its rapid execution speed and opacity also pose risks such as:
- heightened market volatility during stress events,
- potential market manipulation (e.g., spoofing, order flooding),
- operational failures leading to runaway trades or flash crashes, and
- reduced transparency due to complex “black-box” models.
IFSCA notes that global regulators have increasingly stepped in to mitigate these risks, making a dedicated framework for IFSC markets both timely and necessary.
Key Pillars of the Proposed Guidelines
The draft framework is anchored around three core principles:
- Accountability -All algorithmic orders must be uniquely tagged to ensure a complete audit trail. Stock exchanges are empowered to impose penalties and take corrective action to deter manipulation.
- Transparency – Market participants must disclose trading algorithms to stock exchanges and obtain prior approval before deployment. Members offering algo trading will be subject to regular system audits.
- Market Stability – Minimum risk controls are mandated at both exchange and participant levels. Exchanges must enhance surveillance systems, conduct periodic stress tests in simulated environments, and retain the power to shut down dysfunctional algorithms or trading terminals during exigencies.
Strong Risk Management and Surveillance
The guidelines prescribe granular order-level risk checks, including price bands, quantity limits, order value caps, cumulative open order thresholds, and automated kill-switch mechanisms to prevent runaway trading. Persistent high Order-to-Trade Ratio (OTR) violations could attract financial disincentives and even temporary suspension of proprietary trading rights. Additionally, exchanges are required to maintain robust monitoring systems to identify dysfunctional algorithms and proactively prevent market disruptions.
Audits, Reporting, and Implementation
- Annual system audits of algorithmic trading systems will be mandatory, conducted by certified or experienced information systems auditors.
- Exchanges must submit regular reports to IFSCA detailing algorithmic trading volumes, participant usage, surveillance actions, and stress test outcomes.
- Stock exchanges have three months to put necessary systems and by-law amendments in place, while existing algo traders will also need to complete approvals and risk control compliance within this period.
What’s Next?
IFSCA has invited public and stakeholder comments on the proposed guidelines, with feedback due by February 11, 2026. The final framework is expected to play a key role in shaping a transparent, resilient, and globally competitive algorithmic trading ecosystem within India’s IFSCs.
21 Jan 2026: India’s Sustainable Finance Push Enters a New Phase: IFSCA Proposes Expanded Framework for Deposits, Lending and Investments
India’s sustainable finance ecosystem is entering a more structured and scalable phase. The International Financial Services Centres Authority (IFSCA) has released a consultation paper proposing a significantly expanded “Framework for Sustainable Deposits and Sustainable Lending and Investments”, replacing the earlier 2022 guidance focused only on sustainable lending. The move reflects both the rapid globalisation of sustainable finance and India’s ambition to position GIFT IFSC as a credible international hub for green and transition capital.
Global Context: Why Sustainable Finance Matters
Despite global wealth exceeding USD 450 trillion, the annual funding gap to achieve the UN Sustainable Development Goals remains over USD 4 trillion. Over the past decade, this has driven explosive growth in sustainable financial products-green loans, sustainability-linked loans, green and social bonds, ESG funds, and transition finance.
By mid-2025, global sustainable debt outstanding crossed USD 6 trillion, while sustainable syndicated loans exceeded USD 600 billion, with Europe and the Americas dominating issuance. Asia-Pacific, however, continues to gain momentum.
India’s Progress So Far
India’s sustainable finance market has expanded sharply. As of December 2024, cumulative green, social, sustainability and sustainability-linked (GSS+) debt issuance reached nearly USD 56 billion-up almost 3x since 2021. Green debt dominates issuance, accounting for more than 80%.
On the regulatory front, mandatory ESG disclosures (BRSR), RBI’s climate-risk guidelines, sovereign green bonds, and green deposits by banks have steadily strengthened the ecosystem.
GIFT IFSC’s Growing Role
GIFT IFSC has emerged as a meaningful platform for sustainable capital flows:
- ESG-labelled debt listings have crossed USD 15.7 billion
- Sustainable lending by IFSC Banking Units (IBUs) has reached ~USD 4 billion cumulatively
- Dedicated ESG funds, transition bonds, and climate-risk instruments are gaining traction
Against this backdrop, IFSCA’s proposed framework aims to move from intent to execution.
What’s New in the Proposed Framework?
The revised framework materially broadens the scope beyond lending:
- Introduction of Sustainable Deposits: IBUs will be permitted to offer “sustainable deposits” as a distinct product. Proceeds must be deployed into eligible sustainable lending or investments, with clear governance, reporting, and third-party assurance.
- Expansion into Sustainable Investments: The framework explicitly allows IBUs and finance units to invest in:
- ESG-labelled debt securities
- Transition bonds
- ESG schemes and funds – This aligns IFSC activity with global capital-market practices rather than limiting sustainability to loans alone.
- Formal Recognition of Sustainable Trade Finance: Entities can offer green and sustainable trade finance aligned with the International Chamber of Commerce’s 2024 principles-critical for greening supply chains and cross-border trade.
- Mandatory Sustainability Deployment Target: A key shift is the introduction of a minimum 5% deployment target. Each IBU must ensure that at least 5% of the prior year’s aggregate loans and investments are directed toward sustainable lending or investments annually.
- Stronger Governance and Credibility: The framework mandates:
- Board-approved sustainability policies
- External reviews aligned with international standards
- Annual third-party verification of fund usage
- Impact assessment reporting
These measures are designed to curb greenwashing and improve investor confidence.
Why This Matters
The proposed framework signals a clear regulatory intent: sustainable finance is no longer optional or experimental at GIFT IFSC. By combining deposits, lending, investments, targets, and verification under one umbrella, IFSCA is laying the groundwork for scalable, credible, and globally aligned sustainable finance activity.
If implemented effectively, the framework could:
- Deepen international investor participation
- Enable transition finance for carbon-intensive sectors
- Position GIFT IFSC alongside global sustainable finance hubs
What’s Next?
IFSCA has invited stakeholder comments on the proposed framework, with feedback due by February 10, 2026. The final framework is expected to come into force from April 1, 2026.
For banks, funds, and issuers operating in IFSC, this marks an important moment to embed sustainability into core strategy rather than treating it as a niche product.
22 Jan 2026: IFSCA Proposes Framework for Remote Booking by IFSC Banking Units
The International Financial Services Centres Authority (IFSCA) has issued a public consultation paper dated January 22, 2026, proposing a formal regulatory framework for Remote Booking Arrangements (RBA) involving IFSC Banking Units (IBUs).
What is Remote Booking?
Remote booking refers to the practice where financial transactions are executed or booked by an entity or employee located outside the jurisdiction where the business is originated. While such arrangements allow banks to optimise capital, talent, and operational efficiency through centralisation, they also introduce additional regulatory, governance, and risk management challenges, particularly across jurisdictions and time zones.
Why This Matters
With IFSCs positioning themselves as global financial hubs, IBUs are increasingly becoming part of cross-border booking models. IFSCA’s proposed framework aims to ensure that such models remain transparent, well-governed, and resilient, without compromising regulatory oversight or resolution planning.
Key Proposals in the Draft Circular
- Permitted Scope: IBUs may participate in RBAs involving Trading Book transactions (cash and derivatives). They may also be part of centralised booking arrangements (CBA) without restriction.
- Explicit Prohibition: IBUs cannot be part of RBAs involving Banking Book retail or corporate customer loans and deposits.
- Governance & Oversight:
- Prior approval of the IBU’s governing body is mandatory before joining an RBA.
- Parent banks must clearly document and justify the rationale for including an IBU.
- A designated senior official must be disclosed to IFSCA for RBA oversight.
- Risk Management & Controls: Banks must establish a robust control framework, ensure local risk management capability at the IBU, and subject RBAs to independent review by compliance, risk, and internal audit functions.
- Regulatory Transparency: Full details of RBAs must be disclosed to IFSCA, and any changes must be promptly reported along with impact on business model, staffing, and systems.
- Operational Resilience: RBAs must not hinder recovery or resolution planning, and IBUs must be adequately resourced in terms of manpower and infrastructure.
Transition Timeline
- The circular will come into force immediately upon issuance.
- Existing IBUs will be given three months to align with the new requirements.
Global Alignment
IFSCA has benchmarked its approach against guidance issued by leading global regulators such as the UK Prudential Regulation Authority, European Central Bank, and the US Federal Reserve, ensuring consistency with international best practices.
Next Steps
Stakeholders have been invited to submit comments and suggestions to IFSCA by February 13, 2026.
Bottom line: The proposed framework strikes a balance between enabling global booking efficiencies and strengthening governance, risk control, and regulatory visibility for IFSC Banking Units-an important step in reinforcing IFSC India’s credibility as a global financial centre.
27 Jan 2026: Government Proposes GST–SAC Alignment for SEZ Authorized Services: Key Relief for IFSC Units
The Government has released a Consultation Paper proposing alignment of the Default List of Authorized Services for Special Economic Zone (SEZ) units with the Services Accounting Code (SAC) classification under the GST regime, aiming to resolve long-standing operational and tax challenges faced by SEZ and IFSC entities.
Why This Matters
The existing Default List of Authorized Services-originally framed under the erstwhile Service Tax regime-has not been updated post-GST. While service providers now classify invoices strictly using SAC codes, the SEZ authorization framework continues to rely on outdated service descriptions. This mismatch has led to interpretational ambiguity, procedural delays, and denial of IGST exemptions, especially for International Financial Services Centre (IFSC) units.
The Core Issue
SEZ and IFSC units procure a wide range of services-particularly financial, IT, legal, consulting, and infrastructure services-from suppliers in the Domestic Tariff Area (DTA). However:
- Invoice SAC descriptions often do not match the nomenclature used in the existing Default List.
- Broad legacy terms such as “Banking and other financial services” fail to clearly capture modern, SAC-specific financial services.
- Authorities face difficulty endorsing services as “authorized,” creating uncertainty around IGST exemption eligibility.
The Proposed Solution
To address these challenges, the proposal recommends:
- Revising the Default List of Authorized Services by mapping each service to its corresponding GST SAC code and description.
- Ensuring uniform interpretation across SEZ authorities, service providers, and tax officials.
- Providing greater clarity and certainty for SEZ units in availing IGST exemption on input services.
A draft SAC-aligned list, prepared by the International Financial Services Centres Authority (IFSCA), has been released as Annexure A, covering a comprehensive range of services including financial services, IT and software services, professional services, construction, logistics, telecom, and business support services.
Expected Impact
If implemented, the alignment is expected to:
- Reduce disputes and procedural bottlenecks in service endorsement.
- Improve ease of doing business for SEZ and IFSC units.
- Enable smoother availing of GST exemptions for authorized operations.
- Bring SEZ compliance fully in sync with the GST framework.
Call for Public Feedback
Stakeholders and the general public have been invited to submit comments and suggestions on the draft list. Feedback must be sent via email to IFSCA by 16 February 2026, following the prescribed format outlined in the consultation paper