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In a bid to develop and regulate financial products and services, the government-controlled International Financial Services Centers Authority (IFSCA) on April 27 issued a framework for fintech entities in the fields of banking, insurance, securities and fund management.
The “Framework for FinTech Entity in the IFSCs” aims to give boost to the creation of a world-class FinTech center at GIFT IFSC comparable to other International Financial Centers (IFCs). The framework proposes to cover (i) fintech (FinTech) solutions leading to new business models, applications, processes or products in areas/activities related to financial services regulated by the IFSCA and (ii) advanced/innovative technological solutions that aid and assist activities related to financial products, financial services and financial institutions (FinTech).
The framework provides a regulatory sandbox dedicated to FinTech products or solutions, namely IFSCA FinTech regulatory sandbox and authorizes the IFSCA to grant Limited Use Authorization in FinTech Regulatory Sandbox to eligible fintech entities in IFSC. This would allow them to apply for and benefit from grants under the IFSCA FinTech Incentive Program 2022.
Further, it also enables certain classes/categories of technology businesses to have (i) a deployable advanced/innovative technology solution that aids and assists business related to financial products, financial services, financial institutions and, (ii ) a credible track record, including financial performance, obtain Direct entry (authorization by IFSCA) by IFSCA without entering the Regulatory Sandbox.
The framework also incorporates the Interoperable regulatory sandbox (IoRS) mechanism. The IoRS is a proposed mechanism to facilitate the testing of innovative hybrid financial products/services falling within the regulatory scope of multiple financial sector regulators. The IFSCA will facilitate the access of Indian FinTechs to overseas markets and the entry of foreign FinTechs into India.
The framework provides a Regulatory referral mechanism which will be governed in accordance with the provisions of the Memorandum of Understanding (MoU) or special collaboration or arrangement between the IFSCA and the relevant foreign regulator(s)
IFSCA strives to support FinTech companies for proof of concept (PoC), minimum viable product (MVP), prototype development, product testing, commercialization and global market access, etc.
The GIFT-IFSC offers the unique advantage of being a separate financial jurisdiction in India which is treated as an offshore jurisdiction from the perspective of FEMA with no restrictions on currency convertibility. The framework released by IFSCA, a unified regulator for banking, capital markets, insurance and fund management within the IFSC, would enable FinTech companies with innovative ideas or solutions in banking , capital or insurance to have a transparent interaction with a single regulator.
The detailed framework can be viewed at https://ifsca.gov.in/Viewer/Index/292
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