IFSCA Issues TechFin and Ancillary Services Regulations, 2025

The International Financial Services Centres Authority (IFSCA) has introduced the TechFin and Ancillary Services Regulations, 2025, providing a comprehensive regulatory framework to govern technology-driven financial services (TechFin) and ancillary services in IFSCs. The regulations aim to streamline operations, enhance compliance, and boost the global competitiveness of India’s financial centres. 

1. Objective and Scope 

The new regulations focus on enabling entities to provide technology solutions and ancillary services that support financial activities listed under the IFSCA Act, 2019. These include services aiding financial institutions in risk management, compliance, data processing, technology solutions, and other specialized support services. 

2. Key Definitions TechFin Services: 

Technology-driven solutions such as AI, blockchain, cloud computing, cybersecurity, digital identity, and data analytics supporting financial services. Ancillary Services: Professional and operational services such as auditing, fund administration, risk management, legal support, and valuation that assist financial entities. Intermediaries and Service Recipients: Only non-resident entities (not from FATF high-risk jurisdictions) can avail these services, except for limited activities for residents related to setting up offices in IFSC. 

3. Registration Requirements 

All TechFin and Ancillary Service Providers must obtain a certificate of registration from IFSCA via the Single Window IT System (SWIT). Existing service providers under earlier circulars (Feb 2021 and Apr 2022) must migrate to the new framework within 12 months, extendable up to 24 months. Eligible entities include companies, LLPs, branches of foreign entities, or partnership firms comprising members of recognized professional bodies.

4. Fit and Proper 

Criteria The regulations emphasize the integrity and credibility of entities and key personnel. Any individual involved must: Demonstrate financial integrity, good reputation, and honesty. Not have pending charges, insolvency, or regulatory bans. 

5. Governance and Compliance Principal Officer and Compliance Office 

Mandatory appointment of full-time personnel based in IFSC, responsible for operations and regulatory compliance. Adherence to the Code of Conduct (Fourth Schedule) which mandates reporting of material changes, FATF compliance, and adequate infrastructure deployment. 

6. Operational and Reporting Norms 

Operations and financial statements must be maintained in specified foreign currencies (e.g., USD), with INR accounts allowed only for statutory expenses. Periodic reporting to IFSCA is required, with financial disclosures in USD. Annual and periodic compliance audits, inspections, and reporting formats will align with IFSCA mandates. 

7. Prohibited Services 

Entities are barred from offering facility management, transport, logistics, or other services not directly linked to financial activities, as detailed in the Third Schedule. 

8. Permitted Service 

Categories First Schedule (Ancillary Services) includes advisory, auditing, fund administration, compliance management, legal services, risk management, valuation, and secretarial services. Second Schedule (TechFin Services) covers big data analytics, cloud computing, cybersecurity, AI/ML solutions, Web 3.0, quantum tech, digital banking tech, tokenization, and more. 

9. Enforcement and Inspections 

IFSCA retains powers to: Inspect records and systems. Enforce penalties or take actions against non-compliance. Relax strict regulations in exceptional cases to promote financial market growth.