IFSCA Introduces Financial Soundness Norms for Payment System Operators in GIFT City

The International Financial Services Centres Authority (IFSCA) has issued a circular outlining mandatory “financial soundness” criteria for various payment system operators operating within the GIFT IFSC. The directives, which came into immediate effect on October 27, establish clear net worth benchmarks for specific categories of financial market infrastructure.

Under the new guidelines, Trade Receivables Discounting System (TReDS) operators are required to maintain a minimum net worth of $1 million, approximately ₹9.5 crore. Meanwhile, issuers of Legal Entity Identifiers (LEIs) must maintain a minimum net worth of $200,000, roughly ₹1.9 crore. For Trade Repositories, the regulation mandates maintaining a net worth equivalent to at least one year of operating costs, calculated on a half-yearly basis.

For large-value payment systems and card payment networks, the circular requires a sound financial status, though it does not mandate a fixed minimum net-worth figure for these particular categories.

An IFSCA official noted that while the Payment and Settlement Systems Act, 2007, requires the regulator to evaluate an applicant's financial status, management experience, and integrity during authorization, the exact term “financial status” was previously undefined in the Act and associated banking laws. The new framework is intended to provide regulatory clarity for both current operators and prospective applicants.

Existing payment system operators have been granted a six-month window to achieve compliance. Regarding potential non-compliance, regulators stated that action would be administered under Chapter VII of the Payment and Settlement Systems Act, depending on the nature and extent of the shortfall. Operators are expected to submit statutory auditor certificates confirming compliance for the preceding financial year by September 30 annually, while Trade Repositories must submit half-yearly financial computations.

Addressing concerns about the impact on smaller entities, the regulator clarified that categories like large-value payment systems and card networks largely consist of established entities, such as the Clearing Corporation of India Ltd (CCIL). Furthermore, fintech companies and smaller payment infrastructure providers focusing on cross-border payment services are governed by a separate framework under the IFSCA (Payment Services) Regulations, 2024, which requires an initial net worth of $100,000.

"The introduction of defined financial soundness criteria by the IFSCA brings much-needed regulatory clarity to payment system operators in GIFT City. By establishing clear net-worth thresholds for specific operators like TReDS and LEI issuers while maintaining distinct pathways for cross-border fintech services, the regulator is building a structured environment. For businesses and fintech players operating in the GIFT IFSC, aligning with these statutory audit and compliance requirements will be essential to ensure smooth operations and long-term stability within the ecosystem." — Dr. Shishir Gupta, Founder & CEO, StartupLanes