IFSCA (Banking) (Amendment) Regulations, 2023


The International Financial Services Centres Authority (IFSCA) has introduced a set of amendments to the International Financial Services Centres Authority (Banking) Regulations, 2020. These amendments aim to refine and enhance the regulatory framework governing banking activities within International Financial Services Centres (IFSCs).


The amendments provide updated definitions for specific terms used within the regulations. The term “Banking Unit” (BU) now refers to a financial institution licensed or permitted by the IFSCA to undertake permissible activities under the regulations. Furthermore, two new definitions have been introduced: “IFSC Banking Company” (IBC), which represents a Banking Unit operating as a subsidiary company of the Parent Bank within an IFSC, and “IFSC Banking Unit” (IBU), which denotes a Banking Unit operating as a branch of the Parent Bank within an IFSC.

Licensing and Permissions:

The amendments specify that both Indian Banks and Foreign Banks require a license or permission from the IFSCA to establish a Banking Unit within an IFSC. The regulations now allow a Parent Bank, which has already set up an IBU, to convert it into an IBC with prior approval from the IFSCA, subject to certain conditions determined by the authority. The application process for setting up a Banking Unit has also been streamlined, and provisions have been introduced for the withdrawal of applications by the Parent Bank before the grant of a license or permission.

Compliance and Operational Guidelines:

The amendments introduce updated guidelines related to liquidity coverage ratio, net stable funding ratio, leverage ratio, and adherence to norms and guidelines specified by the IFSCA. These guidelines ensure that Banking Units maintain appropriate liquidity and capital adequacy levels while adhering to risk management protocols. The regulations also emphasize compliance with anti-money laundering, counter-terrorist financing, and know your customer guidelines issued by the IFSCA.

Permissible Activities:

The amendments reaffirm the permissible activities that Banking Units can undertake within IFSCs, subject to compliance with relevant terms, conditions, and guidelines. Notably, the amendments clarify that the provision of “Referral services” is considered a permitted activity under the regulations.

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