What is an IFSC?

An International Financial Service Centre is a jurisdiction that provides world class financial services to non-residents and residents, to the extent permissible under the regulations, in a currency other than the domestic currency of the location where the IFSC is located. 

India’s first IFSC

The Government of India established International Financial Services Centres Authority in April 2020 under the International Financial Services Centres Authority Act passed by the Indian Parliament. For the first time, the regulatory powers of four financial services regulators in India, namely, Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India (IRDAI), Pension Fund Regulatory Development Authority of India (PFRDAI), have been vested in IFSCA with respect to regulation of financial institutions, financial services and financial products in the IFSC, making it a unified regulator for the International Financial Services Centre in India. Approved by Government of India as an International Financial Services Centre (IFSC) at GIFT City, the IFSC reinforces India’s strategic position as a global hub for financial services. Apart from providing a global financial platform, it provides easy access to the Indian economy, which is amongst the largest and fastest growing economies in the world and connects ~30 Mn strong Indian diaspora globally to India through the IFSC.

Non-Deliverable Forwards 

A non-deliverable forward (NDF) is a cash-settled, and usually short-term, forward contract. The notional amount is never exchanged, hence the name "non-deliverable." Two parties agree to take opposite sides of a transaction for a set amount of money—at a contracted rate, in the case of a currency NDF. This means that counterparties settle the difference between contracted NDF price and the prevailing spot price. The profit or loss is calculated on the notional amount of the agreement by taking the difference between the agreed-upon rate and the spot rate at the time of settlement.

Exchange Traded Currency Derivatives

An exchange traded derivative is a financial contract that is listed and trades on a regulated exchange. These are derivatives that are traded in a regulated fashion. Exchange traded derivatives have become increasingly popular because of the advantages they have over over the counter (OTC) derivatives, such as standardization, liquidity, and elimination of default risk. Futures and options are two of the most popular exchange traded derivatives. Exchange traded derivatives can be used to hedge exposure or speculate on a wide range of financial assets like commodities, equities, currencies, and even interest rates.

Offshore INR Derivatives 

The offshore market for INR consists of derivative instruments that exists in two major forms namely Non-Deliverable Forward (NDF) market in INR and exchange traded currency derivatives (ETCD) involving INR. While the NDF market is an Over the counter (OTC) market where banks act as market makers, the ETCD contracts involving INR consists of futures and options listed on exchanges. Trading in INR NDF is currently concentrated in Singapore, Hong Kong, London, and New York, while ETCD involving INR are listed on exchanges in Chicago, Dubai and Singapore. Offshore INR trading had also commenced in IFSC from mid-2020. A need was felt to assess the required regulatory and infrastructural facilities available at the jurisdictions which dominate the volumes in offshore INR and replicate the same at IFSC. Accordingly, the committee was formed to recommend specific measures to bring the regulatory and infrastructural facilities at IFSC at par with such foreign jurisdictions.

Committee Mandate

The Committee on positioning IFSC as a hub for offshore trading in INR, chaired by Shri G. Padmanabhan, former Chairman, Bank of India/ former Executive Director, Reserve Bank of India, was appointed by International Financial Services Centres Authority (IFSCA) on February 5,2021 with a mandate to: 

  • Determine the regulatory and infrastructural requirements necessary to create the necessary conditions for development of IFSC as a hub for offshore trading in INR.
  • Assess the current regulatory and infrastructural facilities at IFSCs in light of the requirements determined.
  • Recommend specific measures to bridge the identified gaps between (i) and (ii) in the form of a report to Chairman, IFSCA. 

The Committee could also examine and make recommendations on other issues of importance not specifically mentioned in the above terms of reference.


Some of the key recommendations of the Committee are as follows: 


  • IFSCA should implement the globally accepted regulatory regime for trading and clearing OTC derivatives. 
  • IFSC’s regulatory framework should be geared towards encouraging widest possible client participation subject to satisfaction of KYC/AML norms.
  • Recognition of Omnibus Account structure for participants in IFSC with necessary checks and balances. 


  • Adopt an outcome oriented, principle-based approach for derivative products in IFSC.
  • Permit all category of products at IFSC without any restriction as long as the underlying product is not liable to be used as a surrogate for money laundering.
  • Allow derivatives to be undertaken for the purposes of risk management, risk transformation, yield enhancement or trading/speculation.
  • Request the government to make necessary amendments to the Securities Contract Regulation Act, 1956 to permit offshore derivative instruments (ODIs) on Indian securities to be issued out of IFSC. 


  • IFSCA to create enabling provisions to recognise and regulate Prime Brokerage arrangements. 
  • IFSCA should permit its regulated entities the use of any settlement infrastructure (including outside its jurisdiction) subject to such an infrastructure being appropriately regulated.
  • IFSCA should permit IBUs and foreign entities to comply with the margining guidelines through full substituted compliance.
  • IFSCA should permit re-use of collateral in both bilateral as well as tripartite settlement structures. 
  • IFSCA should, wherever possible and feasible, encourage alternate settlement infrastructure using technologies such as Blockchain. 


  • Exchanges in IFSC be allowed to introduce derivative contracts in new currency pairs for widening the range of FX offerings in IFSC.
  • IFSCA should actively encourage Indian banks to shift the part of their treasury operations, focused on raising foreign exchange resources and hedging their foreign exchange positions, to their IBUs.
  • Regulatory sandbox scheme of IFSCA should encourage fintech platforms operating in areas such as cross border remittances and handling of digital assets.

Update: On December 3, 2021, Hon'ble Prime Minister Narendra Modi will inaugurate the Infinity Forum on fintech, which among other things will discuss and come up with actionable insights into how technology can be leveraged by the fintech industry for inclusive growth.

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