The International Financial Services Centres Authority (IFSCA) has intensified its enforcement actions in GIFT City, issuing show-cause notices to nearly 10 fund management entities (FMEs) and capital market intermediaries (CMIs) over compliance lapses.
Sources indicate that the regulator has sought explanations from these entities, with potential consequences including regulatory action and licence cancellations if responses are unsatisfactory.
The move is part of a broader effort to strengthen adherence to the special economic zone (SEZ) framework within the GIFT International Financial Services Centre (IFSC). Alongside this, IFSCA is preparing a detailed matrix outlining non-compliances and corresponding penalties for IFSC units.
In 2024, the regulator had already issued warnings and advisories to several entities for failing to meet “substance requirements,” such as maintaining a minimum number of on-ground employees and meeting prescribed operational thresholds.
In a recent press release, IFSCA stated that supervisory visits revealed multiple compliance gaps among CMIs. These included the absence of a principal officer or compliance officer, inadequate infrastructure, and trading activities conducted through remote access.
“Based on the supervisory findings, IFSCA has initiated appropriate regulatory action against the CMIs concerned in accordance with the applicable regulatory framework,” the regulator said.
According to industry observers, the increased scrutiny reflects the rapid growth of GIFT City, where more than 200 FMEs and around 300 schemes were operational as of December 2025, with commitments exceeding $32 billion.
“Sometimes regulators take such measures to bring in ‘extra discipline’ so that entities remain cautious and do not take compliance lightly. It’s a balancing act,” a person familiar with the developments said, adding that the actions are unlikely to disrupt overall business activity.
Industry sources noted that most issues stem from inspections conducted over the past 2 years and largely relate to operational lapses. Some stakeholders have called for a more facilitative regulatory approach to support ecosystem growth.
“The regulations in GIFT City have been evolving. Entities need to adapt to these changes,” an industry participant said, adding that some firms may have already addressed the identified gaps.
Leelavathi Naidu, senior partner at RegFin Legal, emphasised the need for balance, stating that while compliance is essential, a supportive approach is necessary to ensure that operational costs do not outweigh business viability.
Responses from the affected entities are currently underway, while queries sent to IFSCA remained unanswered at the time of reporting.
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