The International Financial Services Centres Authority (IFSCA) has stepped up enforcement against alleged non-compliance by fund management entities (FMEs) and capital market intermediaries (CMIs), issuing show-cause notices to nearly 10 entities in recent months, according to sources.
The unified regulator for Gujarat International Finance Tec-City (GIFT City) in Gujarat has sought explanations from these fund houses over alleged lapses. Failure to respond could result in regulatory action, including licence cancellations, people familiar with the matter said.
The regulator has also intensified scrutiny of other units operating in the GIFT International Financial Services Centre (IFSC), as part of efforts to strengthen compliance with the special economic zone (SEZ) framework. In parallel, IFSCA is preparing a detailed matrix of non-compliances and corresponding penalties for IFSC units, sources added.
In 2024, the regulator issued warnings and advisories to several entities for failing to meet “substance requirements”, such as maintaining a minimum number of on-ground employees and other prescribed thresholds.
In a press release issued on Wednesday, IFSCA said that during recent supervisory visits, it observed that certain CMIs were non-compliant with regulatory requirements, including the absence of a principal officer or compliance officer, inadequate infrastructure, and trading conducted through remote access.
“Based on the supervisory findings, IFSCA has initiated appropriate regulatory action against the CMIs concerned in accordance with the applicable regulatory framework,” it said.
“Sometimes regulators take such measures to bring in ‘extra discipline’ so that entities remain cautious and do not take compliance lightly. It’s a balancing act. The number of entities registered in GIFT City has surged manifold in the past five years, so an increase in regulatory action is understandable,” said a person familiar with the developments, adding that the issues are unlikely to “rock the boat” for business activity in the financial hub.
As of December 2025, more than 200 FMEs and around 300 schemes were operating out of GIFT City, with commitments exceeding $32 billion.
Industry sources said most of the issues stem from inspections conducted over the past two years and largely relate to operational lapses. Some have called for a more lenient approach to support the ecosystem’s growth.
“The regulations in GIFT City have been evolving. Entities need to adapt to these changes. Some may have already rectified gaps or alleged violations since the inspections. On the other hand, in the absence of settlement proceedings, those unwilling to opt for adjudication have little choice but to await hearings with the regulator,” said another industry participant.
Sources added that FMEs and intermediaries are in the process of responding to the notices.
Emailed queries to IFSCA remained unanswered at the time of going to press.
