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India's International Financial Services Centres Authority (IFSCA), which oversees the financial hub at GIFT City, has begun urging companies that remain inactive to voluntarily surrender their licences if they do not intend to start operations. This step is aimed at preventing the centre from becoming a registry of paper entities and reinforcing genuine business activity. Some dormant capital market firms have already been approached for licence surrender. The regulator continues to allow flexibility for firms facing legitimate operational delays, while insisting on real presence and activity at the IFSC.
The International Financial Services Centres Authority (IFSCA), regulator of the International Financial Services Centre (IFSC) at GIFT City in Gujarat, has recently started asking companies that have not begun business to voluntarily surrender their licences if they do not plan to become operational. This measure is intended to prevent GIFT City from being filled with entities that exist only on paper and have no real activity. Advertisement
According to people familiar with the matter, officials have been engaging with inactive firms about their plans and urging them to reconsider holding licences when there is no clear intention to operate. In at least three cases involving dormant capital markets ventures, companies were asked to give up their licences for this reason.
India's IFSC, established to be a competitive international finance centre, expects entities to begin business within about a year of registration, a practice common among global financial jurisdictions. IFSCA's approach is meant to align operations at GIFT City more with active hubs like Singapore, where firms are required to show substantive presence, including staff and office facilities.
Globally, some jurisdictions such as the Cayman Islands and Mauritius have more lenient substance requirements that allow firms to have minimal presence and use registered addresses without actual operations. By contrast, GIFT City's rules require a registered office and at least two people on the ground to demonstrate genuine activity.
Of the more than 1,030 entities registered at GIFT IFSC, around 674 operate in the capital markets segment, including fund managers, brokers and clearing members, while the remainder includes fintech firms, banks, and leasing ventures, according to the regulator's latest available figures.
Experts note that other regulators in the past have also engaged with entities that made initial investments but later became inactive. IFSCA's current focus is to ensure that only operational entities retain licences, while inactive ones are encouraged to exit voluntarily.
The regulator has indicated that it will consider genuine cases of delay in starting business activity. Factors such as awaiting international approvals, geopolitical issues affecting launches, or sudden investor withdrawal have been acknowledged as valid reasons for operational delays.
Industry participants say that many firms initially defer full office and personnel costs until their business activity picks up, and once operations begin, there is little reason to remain a paper entity. However, a small number of firms may seek to exploit the system by registering at GIFT City without substantive operations to benefit from regulatory status while operating from elsewhere.
Companies that choose or are asked to surrender licences will need to reapply if they later wish to return to the IFSC. Any reapplication will be reviewed case by case with full disclosure, which remains part of the standard licensing process at GIFT City.
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