IFSCA Enhances Supervision of Capital Market Intermediaries in GIFT IFSC Amid Non-Compliance Concerns

GIFT City's Growth Faces Regulatory Scrutiny

Gujarat International Finance Tec-City (GIFT City), a key financial hub in India, has seen significant growth with over 200 registered Fund Management Entities (FMEs) and hundreds of Capital Market Intermediaries (CMIs). However, recent developments have raised concerns among industry players.

According to sources, the International Financial Services Centres Authority (IFSCA), the regulator overseeing GIFT City, has issued a higher number of Show-Cause Notices (SCNs) in recent months. This follows a series of market-intelligence visits conducted by IFSCA from late February to early March 2026.

The issues flagged during these visits include:

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• Offices being closed or unattended during business hours
• Absence of key personnel, such as the Principal Officer or Compliance Officer
• Limited awareness of regulatory requirements among officers
• Insufficient infrastructure
• Use of remote-access trading software
• Potential conflicts of interest, including Compliance Officers handling trading activities

In response to these findings, IFSCA has initiated regulatory action against several CMIs. While the regulator has not officially confirmed the details, industry sources suggest that the number of SCNs has exceeded previous levels.

IFSCA's Initiatives

In its official press release issued on March 19, 2026, IFSCA emphasized the importance of ensuring compliance with regulatory requirements. The regulator noted that certain CMIs were found to be non-compliant with applicable regulations, including:

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• Being closed or unattended during business hours
• Failing to have authorized personnel available to respond to queries
• Lacking adequate awareness of regulatory frameworks
• Having insufficient infrastructure
• Engaging in activities that create potential conflicts of interest

IFSCA has introduced a new "Master Key" registration process to simplify the registration process for multiple activities and provide flexibility on officer roles. However, the core requirements for actual physical presence, proper infrastructure, and on-site operations remain unchanged.

Industry Perspectives

Industry participants view these enforcement steps as necessary for a fast-growing financial hub, although some suggest a need to balance strict oversight with practical realities. The focus on "substance" also relates to concerns about tax incentives in GIFT City, which offer a 100% tax deduction on certain profits for eligible units.

Key Statistics

• Over 200 registered FMEs in GIFT City
• Hundreds of CMIs operating in GIFT City
• 9 FMEs subject to regulatory actions in July-September 2025
• 1 SCN issued to a CMI in July-September 2025
• 100% tax deduction on certain profits for eligible units under Section 80LA of the Income Tax Act