IFSCA mandates financial soundness norms for GIFT City payment operators

The International Financial Services Centres Authority (IFSCA) has introduced “financial soundness” criteria for payment system operators in GIFT IFSC. Existing operators have six months to comply, while new applicants must meet these norms when seeking authorization. These measures aim to ensure stability and reliability within the payment systems operating in the financial hub.

Under the October 27 circular, Trade Receivables Discounting System (TReDS) operators must maintain a minimum net worth of $1 million (₹9.5 crore). Legal Entity Identifier (LEI) issuers need a minimum net worth of $200,000 (₹1.9 crore). Trade Repositories must hold a net worth equivalent to at least one year’s operating costs, calculated half-yearly.

An IFSCA official explained to businessLine that the Payment and Settlement Systems Act, 2007, mandates the regulator to assess an applicant’s financial status, management experience, and integrity when granting authorization. Since the term “financial status” is not defined in the Act or related laws, including the Reserve Bank of India Act and the Banking Regulation Act, 1949, IFSCA introduced these net-worth criteria to provide regulatory clarity. This move ensures that all stakeholders have a clear understanding of the financial expectations and requirements.

If operators fail to comply, IFSCA can take action under Chapter VII of the Payment and Settlement Systems Act, which addresses offences and penalties. The official noted that while non-compliance is not expected, any action would depend on the nature and extent of the failure and other relevant factors.

The new norms primarily target established players, such as the Clearing Corporation of India Ltd (CCIL) in large-value payment systems and global card networks. For smaller fintech companies and payment infrastructure providers, a separate framework under the IFSCA (Payment Services) Regulations, 2024, requires an initial net worth of $100,000 (₹95 lakh) for cross-border payment services.

Existing operators must submit auditor certificates confirming compliance by September 30 each year. New applicants must include a compliance certificate with their application. The circular is effective immediately, ensuring that the new standards are implemented without delay to enhance the financial integrity of the payment systems in GIFT IFSC.