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Starting a Bullion Trade in GIFT City (2025)

Posted on by Treelife

Are you looking to venture into the lucrative world of bullion trading in India? The India International Bullion Exchange (IIBX) in GIFT City, Gujarat, is rapidly emerging as the premier gateway for efficient and compliant bullion trade in GIFT City. This comprehensive guide will walk you through everything you need to know about setting up bullion trade in GIFT City in 2025.

Why GIFT City is the Premier Destination for Bullion Trading for 2025

GIFT City (Gujarat International Finance Tec-City) is rapidly solidifying its position as the go-to hub for starting bullion trading and setting up bullion trade in India. Designed as a global financial services center, it offers unparalleled advantages for businesses looking to engage in the precious metals market, making it the strategic choice.

Strategic Advantages for Bullion Businesses

  • Global Access & Time Zone Advantage: GIFT City’s strategic geographical location offers a crucial time zone advantage, facilitating seamless global bullion trade operations across major markets, from East to West. This reduces operational overlaps and extends trading hours.
  • Robust Regulatory Framework: Regulated by the International Financial Services Centres Authority (IFSCA), GIFT City provides a transparent, secure, and conducive environment for setting up bullion trading. IFSCA’s clear guidelines foster trust and efficiency in all bullion-related activities.
  • World-Class Infrastructure: Investing in bullion trade in GIFT City means access to state-of-the-art infrastructure. This includes advanced trading platforms, secure vaulting facilities for physical bullion, and comprehensive financial services, ensuring efficient and safe operations.
  • Streamlined Direct Import Gateway: The presence of the India International Bullion Exchange (IIBX) within GIFT City acts as a direct import gateway for bullion into India. This significantly simplifies and accelerates the process of setting up bullion trade and importing precious metals, cutting down on logistical complexities.

IIBX: Your Gateway to India’s Bullion Market

Central to starting bullion trading in GIFT City is the India International Bullion Exchange IFSC Limited (IIBX). Launched in July 2022, IIBX is conceptualized as the principal entry point for bullion imports into India, fostering a world-class ecosystem for bullion trading, investment in related financial products, and secure vaulting services within the IFSC.

Core Features of the India International Bullion Exchange

  • IFSCA Regulation: IIBX operates under the strict oversight of the IFSCA, ensuring high standards of transparency, market integrity, and compliance for all participants engaged in bullion trading.
  • Strong Institutional Backing: Promoted by India’s leading market infrastructure institutions, including NSE, INDIA INX (a subsidiary of BSE), NSDL, CDSL, and MCX, IIBX provides a robust and reliable platform for setting up bullion trading.
  • Innovative Settlement & Payouts: IIBX is recognized for its “Global First Initiatives,” notably the “Every 30 minutes Settlement of BDR (Bullion Depository Receipts)” and direct pay-outs to buyers. This rapid settlement process enhances liquidity and operational efficiency for bullion trade.
  • USD-based Hedging: Entities can leverage USD-based pricing for gold futures on IIBX. This feature eliminates the need for establishing overseas subsidiaries for hedging operations, simplifying risk management for those starting bullion trading and wanting to hedge their price risk.

Who Can Participate in Bullion Trading at IIBX in GIFT City?

The India International Bullion Exchange (IIBX) in GIFT City is designed to be an inclusive platform, welcoming a diverse range of participants keen on setting up bullion trade in GIFT City. Understanding the various roles is key to leveraging the opportunities presented by this thriving ecosystem for starting bullion trading.

Key Players in the IIBX Ecosystem

For those considering setting up bullion trading, IIBX accommodates several categories of entities, each with distinct functions and specific onboarding requirements:

  • Qualified Jewellers (QJ): Qualified Jewellers (QJ) are entities actively engaged in the precious metals business under specific ITS(HS) codes, and they must meet defined net worth and turnover criteria to participate in bullion trading on the IIBX. To qualify, a QJ must have a minimum net worth of ₹25 crore, as per its latest audited financial statement. The net worth is calculated by adding the paid-up share capital, reserves created from profits, and securities premium account, while deducting accumulated losses and unamortized expenditures. Additionally, QJs must ensure that 90% of their average annual turnover over the past three years comes from dealings in precious metals. They are empowered to import both gold and silver directly through IIBX and can hold Tariff Rate Quotas (TRQs). Furthermore, QJs must provide a net worth certificate from a practicing Chartered Accountant, Cost Accountant, or Company Secretary, and comply with the ‘fit and proper’ criteria under Regulation 51(2) of the IFSCA (Bullion Exchange) Regulations, 2020.
  • Tariff Rate Quota (TRQ) Holders: These are entities holding valid India-UAE TRQ licenses or authorizations from the Directorate General of Foreign Trade (DGFT). Their primary advantage is the ability to import UAEGD gold under the India-UAE Comprehensive Economic Partnership Agreement (CEPA) at a concessional customs duty.
  • Gold and Silver Futures Hedgers: This category includes domestic residents (excluding individuals) who have exposure to gold and silver price fluctuations. IIBX offers a dedicated platform for them to hedge their price risk using gold and silver futures contracts.
  • Other Bullion Market Stakeholders: Beyond these primary categories, the IIBX ecosystem also facilitates participation from a broader range of crucial entities, including:
    • Refiners
    • Bullion Dealers
    • Bullion Importers
    • Jewellery Exporters
    • Special Category Clients (SCCs)
    • International Clients

Each of these participant types contributes to a robust and dynamic environment for bullion trading in GIFT City, fostering liquidity and diverse market activities.

Step-by-Step Guide: How to Start Bullion Trading in GIFT City (2025)

Setting up bullion trade in GIFT City is a structured process, tailored to whether your primary focus is physical bullion import/trade or hedging. Follow these precise steps to establish your presence and begin starting bullion trading through the IIBX ecosystem.

Path 1: For Physical Bullion Traders (Qualified Jewellers & TRQ Holders)

If your aim is to import and trade physical gold and silver, this is your direct route for setting up bullion trading in GIFT City.

  • 1. IFSCA Notification & IIBX Membership Application:
    • Action: Submit your application and all required documents via the IIBX Membership Portal. This formal application initiates your recognition as a Qualified Jeweller (QJ) or Valid India-UAE TRQ Holder by IFSCA.
    • Key Purpose: Official acknowledgment and regulatory approval to commence bullion trade.
  • 2. Demat Account Setup with IIDI:
    • Action: Open a Demat Account with India International Depository IFSC Limited (IIDI) once your IFSCA notification is received.
    • Key Purpose: Essential for holding Bullion Depository Receipts (BDRs) electronically, crucial for seamless trading and settlement.
  • 3. Trading and Clearing Account Setup:
    • Action: Obtain your Legal Entity Identifier (LEI) and Unique Client Code (UCC), then set up accounts with an IFSCA-registered member.
    • Key Purpose: Provides direct access to execute trades and manage clearing on the IIBX platform.
  • 4. Submit TRQ Certificate (If Applicable):
    • Action: If you are a TRQ holder, submit your valid TRQ Certificate to both IIBX and IIDI.
    • Key Purpose: Formalizes your eligibility for concessional customs duties under the Tariff Rate Quota.
  • 5. ICE Gate Registration:
    • Action: Register your entity on the ICE Gate portal.
    • Key Purpose: Mandatory for all customs clearance procedures related to your bullion imports.
  • 6. Port Registration:
    • Action: Register your TRQ at your designated import port.
    • Key Purpose: Ensures proper recognition and processing of your import quota at the point of entry.
  • 7. Engage a Custom House Agent (CHA) (Recommended):
    • Action: Consider hiring a CHA to assist with customs clearance processes.
    • Key Purpose: Streamlines complex import procedures and ensures compliance.
  • 8. Connect with an IFSCA Registered Vault Partner:
    • Action: Establish a relationship with an authorized vault partner in GIFT City.
    • Key Purpose: Secure physical storage, delivery, and management of your imported bullion within SEZs.

Path 2: For Bullion Futures Hedgers

If your goal is to manage price risk exposure to gold and silver, follow this streamlined approach for setting up bullion trading for hedging.

  • 1. AD Bank US Dollar Limit Sanction:
    • Action: Obtain US Dollar remittance limits approved by your Authorized Dealer (AD) Bank.
    • Key Purpose: Required for domestic entities to conduct USD-denominated hedging activities via IIBX Gold and Silver Futures.
  • 2. Trading and Clearing Account Setup with IFSCA-Registered Member:
    • Action: Once limits are sanctioned, open a Trading and Clearing Account with any IFSCA-registered Bullion Trading/Clearing Member.
    • Key Purpose: Provides direct access to the IIBX platform for executing your hedging strategies. (Note: Direct onboarding with IIBX itself is not required for hedgers; membership with a registered entity suffices.)

By following these targeted steps, both physical traders and hedgers can efficiently navigate the process of setting up bullion trade in GIFT City and capitalize on the opportunities within the IIBX ecosystem.

Top Benefits: Importing TRQ Gold through IIBX for Bullion Trading

Setting up bullion trade in GIFT City and leveraging the India International Bullion Exchange (IIBX) offers substantial advantages, particularly for importing Tariff Rate Quota (TRQ) gold under the India-UAE Comprehensive Economic Partnership Agreement (CEPA). These benefits are designed to streamline operations, reduce costs, and enhance efficiency for those starting bullion trading.

Unlocking Efficiency and Cost Savings in Bullion Trade

  • Exemption from IGCR Rule: A key benefit for bullion trade in GIFT City is the non-applicability of the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (IGCR Rule). As per Notification No. 66/2023-Customs, if the importer and the TRQ holder are the same entity, direct import through IIBX means exemption from this rule.
  • Only 5% Customs Duty & No 1% Bond: Importers of TRQ gold through IIBX benefit significantly by paying only 5% customs duty. Crucially, there’s no requirement to block an additional 1% of the Customs Duty value as a bond with Customs, nor do holders need to deposit this 1% with intermediaries. This directly impacts the capital required for setting up bullion trading.
  • Seamless TRQ Imports for Qualified Jewellers (QJs): Qualified Jewellers can import their TRQ gold through IIBX without the need for additional re-registration for TRQ, simplifying the process of starting bullion trading.
  • Improved Working Capital Management: Eliminating the necessity for upfront payment of customs duty and various premiums allows businesses to manage and allocate their working capital more efficiently across all operations. This is a significant financial advantage for setting up bullion trade.
  • Every 30 Minutes Credit of Bullion Depository Receipts (BDRs): IIBX leads globally by crediting BDRs to clients’ Demat accounts within just 30 minutes. This facilitates same-day import of gold/silver into the Domestic Tariff Area (DTA) once BDRs are credited and customs processes are cleared, drastically speeding up bullion trade cycles.
  • Flexibility and Convenience in Pricing Lower Lot Sizes: IIBX contracts accommodate purchases as low as 100 grams under the UAEGDTRQ GOLD T+0 contract, and 1 Kg under other quantities. This provides unparalleled flexibility and convenience for diverse trading strategies when setting up bullion trading.
  • Low Transaction Charges: IIBX offers highly competitive and very low transaction charges, ensuring a cost-effective environment for all bullion trading activities.

Regulatory Landscape for Bullion Trading in GIFT City (2025)

Setting up bullion trade in GIFT City necessitates a clear understanding of its robust regulatory framework. Adherence to guidelines set by the International Financial Services Centres Authority (IFSCA) and the Ministry of Finance ensures transparent and compliant operations for all participants.

Key Regulations Governing Bullion Trade at IIBX

  • IFSCA & Ministry of Finance Oversight: These bodies establish the foundational rules, ensuring a secure and reliable environment for bullion trading within the IFSC.
  • Customs Act, 1962 & Recent Amendments: Compliance is crucial with the Customs Act, particularly amendments like Notification No. 66/2023-Customs. This notification clarified that the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022, are not applicable when the importer and TRQ Holder are the same entity, streamlining bullion trade imports.
  • India-UAE CEPA & TRQ Gold: The Comprehensive Economic Partnership Agreement (CEPA) with the UAE offers an annual Tariff Rate Quota (TRQ) for gold, providing a 1% customs duty concession. For Fiscal Year 2025-26, the TRQ gold quota stands at 180 tonnes, a significant incentive for setting up bullion trading.
  • Updated Import Duty: The import duty on TRQ Gold is set at 5%, effective from July 23rd, 2024, providing a clear cost structure for those starting bullion trading.

Hedging Gold & Silver Price Risk on IIBX

For businesses engaged in bullion trading, managing price volatility is critical. IIBX offers robust mechanisms for hedging gold and silver price risk, allowing domestic residents (excluding individuals) to secure their positions.

IIBX Gold Futures: Specifications & Benefits for Hedgers

IIBX launched Gold Futures on June 21st, 2024, with plans for Silver Futures underway, providing essential tools for setting up bullion trade with effective risk management.

  • Purpose: Enables domestic entities with gold/silver price exposure to effectively hedge their risk in USD.
  • Key Contract Specifications:
    • Trading Unit: 1 Kilogram (Kg)
    • Price Quote: In US Dollars per Troy Ounce
    • Trading Hours: Monday to Friday, 9:00 Hrs. to 23:30 Hrs. (IST)
    • Initial Margin: 6% (+1 ELM) or based on VaR (IMPOR Adjusted), whichever is higher.
    • Delivery: Mandatory delivery through Bullion Depository Receipts (BDRs) at IFSCA-registered vaults in GIFT City, based on buyer and seller intention matching.

Bullion Depository Receipts (BDRs) and Efficient Settlement at IIBX

A cornerstone of bullion trade in GIFT City is the innovative Bullion Depository Receipts (BDRs) system operated by IIBX. This electronic representation of physical bullion significantly streamlines transactions and enhances efficiency for setting up bullion trading.

Understanding IIBX’s Advanced Settlement Mechanism

  • BDR System Explained: Physical bullion, once deposited in IFSCA-registered vaults, is converted into electronic Bullion Depository Receipts (BDRs). These BDRs facilitate paperless trading and ownership transfer.
  • Rapid Settlement Timelines:
    • T+0 Settlement Contracts: Market hours operate from 9:00 Hrs. to 18:20 Hrs. (IST), enabling quick transactions.
    • BDR Settlement: Occurs with remarkable speed, every 30 minutes, ensuring prompt crediting to Demat accounts.
    • Fund Settlement: Activated multiple times daily at 12:15, 15:15, and 19:00 (IST).
  • 100% Early Pay-in: This system mandates 100% early pay-in for both funds and securities, further enhancing transaction security and speed.
  • Impact on Turnaround Time (TAT): This highly efficient system drastically reduces the overall turnaround time for trade processes, enabling Qualified Jewellers to achieve same-day delivery of bullion post-credit of BDR and customs clearance. This accelerates the entire cycle for starting bullion trading.

Future Outlook: Expanding Bullion Trade in GIFT City Beyond 2025

The trajectory for bullion trade in GIFT City beyond 2025 is exceptionally positive. The combination of a proactive regulatory environment and the innovative framework of IIBX firmly positions it as a formidable global hub for precious metals.

Why GIFT City is Poised for Continued Growth in Bullion Trading

  • Proactive Regulatory Environment: The continuous support and adaptive regulations from IFSCA create a stable and attractive ecosystem for investment and setting up bullion trade.
  • Innovative IIBX Framework: With ongoing advancements in settlement processes and the planned expansion of product offerings, such as Silver Futures, the IIBX ecosystem is poised for substantial growth and increased market sophistication.
  • Strategic Decision for Businesses: Entities seeking to diversify portfolios, hedge against price risks, or directly import bullion will find setting up bullion trade in GIFT City an increasingly strategic and advantageous decision, offering a competitive edge in the global market.

International Bullion Exchange (IBX) at GIFT City – Complete Guide

Posted on by Treelife

Introduction to IBX at GIFT City

What is the International Bullion Exchange (IBX)?

The International Bullion Exchange (IBX) is India’s pioneering platform for trading physical gold and silver. Located at GIFT City, Gandhinagar, this exchange is designed to offer an efficient, transparent, and seamless trading experience for bullion dealers, jewellers, and institutional investors. IBX plays a crucial role in providing a well-regulated marketplace for gold and silver transactions, focusing on:

  • Efficient Price Discovery: Ensures that market prices reflect fair value through transparent and competitive trading.
  • Responsible Sourcing: Guarantees that the bullion traded on the exchange adheres to ethical sourcing standards, supporting sustainable practices.
  • High-Quality Bullion Trading: Facilitates the buying and selling of high-purity gold and silver, meeting international quality standards.

IBX enables direct imports of gold, allowing TRQ holders to bypass intermediaries, thus eliminating additional costs and delays. The TRQ Gold import process offers a reduced 5% customs duty and removes the need for blocking a 1% customs duty bond. This provides a seamless, cost-effective way to import bullion.

The IBX Ecosystem serves as a centralized hub for bullion trading in India, enhancing the ease of gold and silver imports and exports, while also positioning India to become a significant player in global bullion markets.

Significance of IBX for India and Global Bullion Trade

India is the second-largest consumer of gold globally, making its bullion market one of the most influential in the world. Despite its high consumption, India has historically lacked control over global bullion price setting. The launch of IBX addresses this challenge and enables India to:

  • Position India as a Price Setter: By facilitating direct trading of bullion, IBX allows India to influence global gold and silver prices, rather than relying on international exchanges.
  • Enhance Global Market Integration: IBX connects India to the global bullion market, enabling international traders and institutional investors to directly participate in Indian bullion trade, thus increasing liquidity and market depth.
  • Boosting India’s Role in Global Bullion Trade: IBX provides India with a strategic advantage in bullion trading, reinforcing its position as a global leader in the precious metals market.

IBX further strengthens India’s position by offering TRQ holders the ability to import gold directly without intermediary steps, exempted from the IGCR rule, and only paying 5% customs duty instead of the regular rate. This unique benefit enhances India’s role in the global bullion market.

IBX’s integration into the global trading system is an essential step in India’s aspiration to be a key player in global bullion markets. With a platform that offers transparency and integrity, it stands as a pivotal milestone in India’s journey toward becoming a global bullion hub.

Overview of GIFT City and Its Role in IBX

GIFT City, short for Gujarat International Finance Tec-City, is a state-of-the-art financial district located in Gandhinagar, Gujarat. It serves as the foundation for India’s first International Financial Services Centre (IFSC). This strategic location hosts several financial institutions, including IBX, and offers a range of benefits:

  • Hub for Financial Services: GIFT City is designed to be a global financial services hub, attracting investors, traders, and financial institutions worldwide.
  • International Standards: GIFT City is built with world-class infrastructure that adheres to international standards, providing an optimal environment for IBX to operate and grow.
  • Seamless Regulatory Environment: The IFSCA (International Financial Services Centres Authority) regulates all operations within GIFT City, ensuring smooth operations for IBX participants and fostering trust among global investors.

The International Financial Services Centres Authority (IFSCA) regulates IBX registration process, ensuring that only qualified jewelers and registered IFSCA entities can import bullion directly through IBX. The IFSCA’s streamlined processes support both market participants and customs clearance, enabling smoother bullion imports. The strategic location, combined with advanced infrastructure, makes it an ideal place for IBX to lead India’s bullion trading sector and integrate seamlessly with global financial markets.

Role of IFSCA in Regulating IBX at GIFT City

What is IFSCA and Its Regulatory Role for IBX?

The International Financial Services Centres Authority (IFSCA) is the primary regulatory body overseeing operations within International Financial Services Centres (IFSCs) in India, including IBX at GIFT City. IFSCA ensures that all financial activities conducted in IFSCs adhere to global standards of transparency, security, and efficiency. Its role in regulating IBX is pivotal for maintaining the credibility and smooth functioning of the exchange.

Key responsibilities of IFSCA in regulating IBX include:

  • Ensuring Compliance: IFSCA ensures that IBX and its participants comply with all applicable regulations related to gold and silver trading, customs duties, and taxation.
  • Market Efficiency: The authority monitors the exchange to ensure that trading practices are efficient, transparent, and free from manipulation.
  • Promoting Responsible Trading: IFSCA enforces strict guidelines on responsible sourcing of bullion, ensuring that the precious metals traded on IBX meet international ethical standards.

IFSCA’s regulatory framework provides confidence to investors and market participants, ensuring that all activities on IBX are fair, secure, and compliant with global financial practices.

GIFT City as a Hub for Financial Services

Financial and Tech Services Hub: A Global Financial Center

GIFT City (Gujarat International Finance Tec-City) is India’s flagship project to develop an integrated global financial services hub. Designed with state-of-the-art infrastructure, GIFT City is set to become a central player in the global financial landscape by hosting India’s first International Financial Services Centre (IFSC), where IBX operates. This strategic location offers a wide range of services, including finance, banking, insurance, and technology, making it an attractive destination for international investors and businesses.

Key Features of GIFT City as a Financial Services Hub:

  • Multi-Service SEZ: GIFT City is a Special Economic Zone (SEZ) that offers a one-stop solution for all financial services, from banking to fintech, enabling smooth and cost-efficient operations for entities like IBX.
  • World-Class Infrastructure: GIFT City is equipped with high-quality infrastructure that supports the needs of global businesses, including financial institutions and technology firms.
  • Regulated by IFSCA: The IFSCA regulates all entities operating in GIFT City, ensuring adherence to international standards and fostering investor confidence.

GIFT City’s Role in IBX Growth

  • Enhanced Connectivity: GIFT City’s strategic location makes it an ideal gateway for global bullion trading, helping IBX attract international participants and bullion traders.
  • Global Financial Integration: As a hub for international financial services, GIFT City facilitates the integration of India’s bullion market with global financial systems, allowing foreign traders to easily engage with Indian bullion markets through IBX.

The Launch of IBX: A Game Changer for India’s Bullion Market

Prime Minister’s Launch of IBX

On July 29, 2022, the Prime Minister of India officially launched the India International Bullion Exchange (IBX), marking a transformative step in the country’s bullion market. This initiative aims to streamline the gold and silver trading process, empower qualified jewellers, and position India as a more influential player in the global bullion market.

The launch of IBX reflects India’s vision of becoming a key player in setting global bullion prices while addressing the long-standing challenges in the import and export of bullion. The IBX platform provides a regulated marketplace for bullion trading, offering transparency and efficiency. 

As part of the TRQ onboarding process, IBX simplifies bullion imports through the Customs EDI Gateway (ICEGATE), and qualified entities can avail direct imports. Custom House Agents (CHA) can assist with the customs clearance, ensuring compliance with GST regulations and reducing time delays.

Key Benefits for Bullion Dealers and Qualified Jewellers

The India International Bullion Exchange (IBX) provides a range of benefits that make it an ideal platform for bullion dealers and qualified jewellers. From transparent pricing to flexible trading options, IBX empowers market participants to operate more efficiently in the bullion market.

1. Direct Import of Bullion

Before the introduction of IBX, qualified jewellers had to rely on intermediaries for bullion imports, which often led to higher costs and delays. With IBX, qualified jewellers can now directly import bullion, streamlining the process and reducing reliance on middlemen.

  • Faster Import Process: Jewellers can now directly source gold and silver from international suppliers.
  • Cost-Effective: Eliminates intermediaries, lowering the overall cost of imports.
  • Ethical Sourcing: Ensures that the bullion is sourced responsibly, in line with global OECD Due Diligence Guidance.

2. Enhanced Trading Opportunities

IBX provides bullion dealers and qualified jewellers with the ability to trade on a globally recognized platform, with the added advantage of competitive pricing.

  • Global Exposure: IBX connects Indian traders with global market participants, offering access to international pricing and liquidity.
  • Increased Trading Flexibility: Dealers can now trade in a range of gold and silver products that meet international standards.
  • Access to Competitive Rates: IBX offers pricing that is competitive with other international exchanges, providing an opportunity for better trading margins.

3. Transparency and Compliance

IBX operates with full regulatory oversight by IFSCA, ensuring that all transactions are conducted transparently and in compliance with international financial and regulatory standards.

  • Secure Transactions: Ensures that bullion transactions are safe and meet regulatory requirements.
  • Price Transparency: Facilitates fair price discovery through competitive and transparent market pricing.

Future Prospects of IBX in the Global Bullion Market

1. Fostering Price Discovery

As India’s first International Bullion Exchange, IBX plays a crucial role in enabling price discovery for gold and silver traded within India. By offering a transparent and accessible platform for international and domestic traders, IBX helps in setting fair market prices that reflect global demand and supply dynamics.

  • Market Liquidity: By connecting domestic and global buyers and sellers, IBX increases the liquidity in India’s bullion market.
  • Competitive Pricing: With the integration of international markets, IBX ensures that India can influence global bullion pricing.

2. New Investment Opportunities

IBX opens the door to new investment opportunities for investors, dealers, and jewellers, both domestically and internationally. The platform enables access to gold and silver trading in various contract sizes and forms, offering flexibility for different types of investors.

  • Investment in Bullion Financial Products: Investors can engage in a variety of financial products related to precious metals.
  • Global Participation: IBX attracts international investors, providing them with direct access to India’s bullion market.

3. A Hub for International Bullion Trading

IBX has the potential to become a global hub for bullion trading, bringing together traders and investors from around the world. This will help strengthen India’s position in the global bullion market, with GIFT City serving as a strategic location for global bullion trade.

How Does IBX Work?

The India International Bullion Exchange (IBX) simplifies the process of trading gold and silver by providing a transparent and efficient platform. To import bullion, TRQ holders must be registered with IFSCA, complete their ICEGATE registration, and work with Custom House Agents (CHA) for smooth customs processing. Additionally, IBX ensures that fund transfers to the clearing system are seamless, providing an efficient trading environment. Below is a clear step-by-step guide on how IBX works, from setting up accounts to executing trades.

The Process Flow for Trading on IBX

Step 1: Open a Trading Account

To start trading on IBX, the first step is to open a trading account with any registered trading member authorized by the exchange. This account will provide you with access to the IBX platform.

  • Requirements: Complete KYC (Know Your Customer) formalities and submit identification documents.
  • Purpose: The trading account gives you the ability to place buy and sell orders on the IBX platform.

Step 2: Open a Demat Account with IIDI (India International Depository IFSC Limited)

After setting up your trading account, the next step is to open a Demat account with IIDI (India International Depository IFSC Limited). This account will hold your Bullion Depository Receipts (BDRs), which represent the gold and silver traded on IBX.

  • Requirements: Provide your personal details and KYC documents to IIDI.
  • Purpose: The Demat account securely holds your BDRs, which are linked to the physical bullion stored in authorized vaults.

Step 3: Transfer Funds and Initiate Trade

Once your accounts are set up, you need to transfer funds into the IBX clearing system through an AD Bank which will issue Bullion Depository receipts. This ensures that you have the necessary capital for buying bullion.

  • How it Works: Transfer funds from your bank to AD Bank and deposit Bullion Depository Receipts with IBX account.
  • Purpose: To purchase gold and silver contracts on the IBX platform.

Step 4: Trade on the IBX Platform for Buying/Selling Bullion

With funds in your account, you can now start trading on the IBX platform. Place buy or sell orders for gold and silver at competitive market prices.

  • What You Need: Monitor the market, place buy/sell orders, and execute trades based on market conditions.
  • Purpose: To trade bullion efficiently through a transparent and competitive marketplace.

Key Players in IBX – Qualified Jewellers, TRQ Holders, and More

1. Qualified Jewellers

Qualified Jewellers are key participants in the IBX ecosystem. These entities, with a minimum net worth of ₹25 Crores, deal in precious metals and are eligible to directly trade bullion on the IBX platform.

  • Eligibility Criteria:
    • Net Worth: ₹25 Crores.
    • Focus on Precious Metals: Must deal primarily in gold and silver.
    • Role: Qualified jewellers can directly import bullion and trade on IBX, eliminating the need for intermediaries.

2. TRQ Holders

TRQ Holders (Tariff Rate Quota Holders) are entities that can directly import gold through IBX. They are crucial for facilitating bullion imports into India.

  • Eligibility Criteria:
    • Registered with IFSCA: Entities must meet regulatory requirements set by the International Financial Services Centres Authority (IFSCA).
  • Role: TRQ holders enable the direct import of gold, streamlining the entire process.

Advantages of IBX for Bullion Dealers and Qualified Jewellers

The India International Bullion Exchange (IBX) offers numerous advantages to bullion dealers and qualified jewellers. By providing a transparent, regulated platform, IBX is reshaping the way gold and silver are traded in India and beyond. Below are the key benefits that make IBX an attractive option for market participants.

1. Lower Transaction Costs

One of the most significant advantages of trading on IBX is the lower transaction costs compared to other global exchanges. Traditional bullion markets often involve high fees for intermediaries, customs, and trading. IBX eliminates many of these intermediaries, providing a cost-effective solution for dealers and jewellers. By eliminating intermediaries and offering direct bullion imports through the TRQ Gold process, IBX drastically reduces transaction costs. The 5% customs duty and removal of the 1% bond requirement further lower overall import costs, allowing dealers and jewellers to improve profitability.

  • Affordable Trading: No middlemen, meaning lower commission fees and cheaper transaction costs.
  • Competitive Edge: Bullion dealers and jewellers can save money on each trade, increasing their overall profitability.

By offering cost-effective trading, IBX enables market participants to trade bullion more efficiently and at competitive rates.

2. Longer Trading Hours

IBX provides extended trading hours compared to many global bullion exchanges. This feature allows dealers and jewellers more flexibility in executing trades, especially for those dealing across different time zones.

  • Flexible Trading Schedule: With longer market hours, IBX accommodates a wider range of trading strategies, including intraday trading and global market reactions.
  • 24/7 Access: Traders can buy and sell bullion at any time within the platform’s operating hours, allowing them to respond quickly to market changes and global events.

These extended hours make IBX an ideal platform for traders looking for more flexibility in their trading strategies.

3. Quality Assurance

All bullion traded on IBX meets stringent international standards for quality assurance. IBX adheres to the OECD Due Diligence Guidance, ensuring that all gold and silver traded through the exchange come from responsible, conflict-free sources.

  • OECD Standards: IBX guarantees that the bullion traded on the platform is sourced in line with international ethical standards.
  • Transparency and Trust: Buyers and sellers can trust that the metals they trade are of the highest quality, which is crucial in maintaining market integrity.

This focus on quality assurance enhances the credibility of IBX and provides confidence to market participants.

4. Reliable Operational Standards

IBX ensures that all transactions are conducted under high operational standards. The exchange platform is built with security, efficiency, and transparency in mind, making it a reliable marketplace for bullion traders.

  • High Security: IBX uses state-of-the-art security measures to protect both user information and funds.
  • Efficient Operations: The platform is designed to handle high volumes of transactions, ensuring quick and reliable order execution.
  • Regulatory Oversight: As IBX operates under the supervision of IFSCA, it ensures compliance with Indian and international regulations, enhancing trust among market participants.

With secure and reliable operations, IBX ensures that traders can focus on maximizing profits without worrying about the integrity of the platform.

IBX Products and Trading Mechanism

The India International Bullion Exchange (IBX) offers a variety of bullion contracts and a streamlined trading mechanism designed to facilitate efficient and transparent trading of gold and silver. Below is a breakdown of the available products, market hours, and settlement types on IBX.

Gold Contracts Available on IBX

IBX offers several types of gold contracts to cater to the diverse needs of traders, jewellers, and investors. These contracts provide flexibility and competitive pricing, helping market participants make informed decisions.

Available Gold Contracts:

  • GOLD 995 T+0: A standard gold contract for trading 995-purity gold, available for immediate settlement (T+0).
  • Gold Mini 999 T+0: A smaller contract designed for 999-purity gold (suitable for retail traders), also available for T+0 settlement.
  • UAEGD Gold 995 T+0 (1kg, 100g): Gold sourced from UAE Good Delivery (UAEGD) accredited refiners, with options to trade in 1kg and 100g weights, available for T+0 settlement.
  • TRQ Gold contracts: IBX offers TRQ Gold contracts, including the UAEGD Gold 995 T+0 contract for both 100g and 1kg weights. These contracts provide flexibility for different market participants, from small jewellers to large institutional investors.

These contracts are designed to provide liquidity, transparency, and access to gold in various forms, making them suitable for a range of participants—from large institutional traders to small jewellers.

Silver Contracts Available on IBX

IBX also facilitates the trading of silver, providing a variety of contracts to cater to different trading preferences and volumes.

Available Silver Contracts:

  • Silver Bars and Grains: Available for T+0 settlement, these contracts provide flexibility for trading in both bars and grains.
    • Silver Bars: Available in larger sizes, perfect for institutional investors.
    • Silver Grains: Smaller-sized contracts suitable for jewellers and smaller investors.

The ability to trade silver in both bars and grains allows market participants to tailor their trades according to their needs and preferences, while T+0 settlement ensures quick and efficient execution.

Market Hours and Settlement Types

IBX operates with clear, defined market hours and settlement types to ensure smooth and efficient trading for all market participants.

Market Hours: 9:00 AM to 9:30 PM IST

  • The IBX market hours run from 9:00 AM to 9:30 PM IST, providing ample time for traders to execute their transactions within the trading day.
  • The extended market hours ensure that traders across different time zones can participate and react to global market conditions.

T+0 Settlement: 100% Early Pay-in of Funds and Securities

  • T+0 settlement ensures that all trades are settled on the same day, providing quick turnaround times for bullion trades.
  • This settlement type offers 100% early pay-in of funds and securities, ensuring that both the buyer and seller are secured in the transaction and the transfer is completed swiftly.

BDR Settlement: Happens Every 30 Minutes

  • Bullion Depository Receipt (BDR) settlement happens every 30 minutes, ensuring that trades are processed efficiently and BDRs are credited to the trader’s Demat account in a timely manner.
  • This frequent settlement cycle adds to the liquidity and efficiency of trading on the IBX platform.

Eligibility Criteria for Participating in IBX

IBX is designed to allow only eligible participants to engage in trading, ensuring that all market players meet specific criteria for regulatory compliance and financial stability.

1. Qualified Jewellers

Qualified Jewellers are key players in the IBX ecosystem. To participate, jewellers must meet the following criteria:

  • Net Worth Requirement: Jewellers must have a minimum net worth of ₹25 Crores.
  • Precious Metals Trading: Jewellers must deal in precious metals as per the HSN codes related to gold and silver.
  • Compliance: They must adhere to regulatory standards and be certified by IFSCA to ensure compliance with IBX’s operating guidelines.

2. TRQ Holders

TRQ Holders (Trade and Remittance Qualified Holders) can directly import gold through IBX, but must meet certain requirements:

  • IFSCA Registration: TRQ holders must be registered with IFSCA.
  • To participate as a TRQ holder, entities must be registered with IFSCA and comply with customs clearance procedures via ICEGATE. The eligibility criteria include adherence to international sourcing and regulatory standards.
  • Additional Regulatory Criteria: TRQ holders must also meet other regulatory requirements set by IBX and IFSCA, ensuring that only eligible entities can import bullion.

By ensuring strict eligibility criteria, IBX maintains a regulated and secure trading environment, fostering trust and market integrity.

How to Import Gold through IBX at GIFT City

Importing gold through the India International Bullion Exchange (IBX) at GIFT City is a streamlined process designed to facilitate efficient and direct bullion trade. Here’s a step-by-step guide for jewellers looking to import gold through IBX, ensuring a smooth and compliant experience.

Step-by-Step Guide for Jewellers

1. Open a Trading and Demat Account with IBX Partners

To begin the process of importing gold through IBX, jewellers need to open two essential accounts:

  • Trading Account: This account allows you to engage with the IBX platform, enabling you to execute buy and sell orders for gold and silver.
    • Required Documentation: Complete your KYC (Know Your Customer) formalities and submit identification documents.
    • Partnered Trading Members: Open your trading account with any IBX-approved trading member.
  • Demat Account: A Demat account is essential for holding Bullion Depository Receipts (BDRs), which represent the physical gold stored in the authorized vaults.
    • IIDI Registration: Open your Demat account with India International Depository IFSC Limited (IIDI), which facilitates the secure storage of bullion.

2. Ensure GST Compliance and Customs Clearance

For smooth gold imports through IBX, jewellers must comply with GST regulations and complete customs clearance procedures.

  • GST Compliance: Ensure that you are fully compliant with Goods and Services Tax (GST) regulations. This includes registering for GST if you haven’t already and ensuring that all GST returns are filed up-to-date.
    • Importance: GST compliance is necessary for all transactions involving bullion, as it ensures the smooth flow of goods and services through customs.
  • Customs Clearance: To import gold, you need to complete customs clearance through ICEGATE (Indian Customs EDI Gateway).
    • Import Documentation: Submit the Bill of Entry and relevant documentation required by customs to ensure smooth clearance.
    • Customs Handling Agent (CHA): Engage with a CHA (Customs Handling Agent) to assist with the customs clearance process and ensure that all customs duties are correctly handled.

Key Considerations for Gold Importers

  • TRQ Registration: For direct imports of gold, ensure that your entity is a registered Trade and Remittance Qualified (TRQ) holder with the IFSCA. This enables direct bullion imports via IBX.
  • To import gold, jewellers must first register for TRQ with IFSCA, complete ICEGATE registration for customs clearance, and ensure compliance with GST regulations. The TRQ holder can directly import gold, streamlining the process and minimizing intermediaries.
  • Storage and Security: Gold is stored in authorized vaults by IIDI, ensuring that the imported gold is safely held and easily accessible for trade.
  • Liquidity and Flexibility: IBX offers competitive pricing and flexibility in purchasing gold in various contract sizes, from 100g to 1kg, depending on your needs.

Setting Up Payment Service Providers (PSPs) in GIFT City IFSCA

Posted on by Treelife

Overview of GIFT City and IFSC

What is GIFT City and the International Financial Services Centre (IFSC)?

GIFT City (Gujarat International Finance Tec-City) in Gandhinagar, Gujarat, is a world-class financial hub offering cutting-edge infrastructure for businesses in sectors like banking, insurance, and asset management. The International Financial Services Centre (IFSC) within GIFT City facilitates global financial transactions by providing tax benefits, regulatory flexibility, and access to international markets.

Strategic Importance of Setting Up PSPs in GIFT IFSC for Businesses

Setting up Payment Service Providers (PSPs) in GIFT IFSC offers significant advantages:

1. Regulatory Ease

  • Governed by IFSCA, GIFT IFSC provides a streamlined regulatory process, ensuring global compliance with reduced complexities.

2. Tax Benefits

  • Income tax exemptions, GST relief, and other financial incentives make GIFT IFSC a cost-effective location for PSPs.

3. Access to Global Markets

  • PSPs can serve cross-border clients as well as Indian clients looking to remit funds abroad, facilitating international transactions and expanding their global reach.

4. Advanced Infrastructure

  • State-of-the-art facilities and innovative technologies like tech platforms and AI-powered payment systems support PSP operations.

5. Quick and Efficient Setup

  • A simplified setup process allows PSPs to begin operations quickly, with minimal regulatory hurdles.

Understanding Payment Service Providers (PSPs)

What are Payment Service Providers (PSPs)?

Payment Service Providers (PSPs) are companies that facilitate the processing of financial transactions between buyers and sellers. PSPs enable businesses and individuals to send and receive payments through various platforms, such as websites, mobile apps, or point-of-sale terminals. These providers play a crucial role in the financial ecosystem by offering a secure, reliable, and efficient way to transfer money and conduct transactions.

Role of PSPs in the Global and Indian Financial Ecosystem

PSPs are integral to both the global and Indian financial systems, enabling businesses to accept payments from customers worldwide. The role of PSPs includes:

  • Facilitating cross-border payments: PSPs bridge the gap between different countries and currencies, allowing businesses to engage in international trade and customers to make payments seamlessly.
  • Driving digital payments growth: With the shift to digital platforms, PSPs are central to enabling online transactions, particularly in the context of cross border remittances, escrow services, etc.

PSPs are essential for extending India’s digital payment revolution at a global stage, considering the success of platforms like Google Pay, PhonePe, and Paytm which has led to a surge in online transactions domestically..

Different Types of PSPs

PSPs come in various forms, each offering a specific set of services to meet the needs of businesses and consumers. Here are the primary types:

  1. Cross border Remittance Service Providers
    • Definition: Cross border Remittance service providers enable cross-border money transfers, helping individuals send money to their families or businesses to transfer payments internationally.
  2. E-money issuance Services
    • Definition: E–money issuance services allow users to store, send, and receive funds digitally. These platforms can be used for online shopping, bill payments, and peer-to-peer transfers.
  3. Merchant Acquisition services
    • Definition: Merchant acquisition services the processing of card payments for businesses. They enable businesses to accept payments via credit or debit cards through Point-of-Sale (POS) systems or online payment systems.
  4. Escrow Services
    • Definition: These are services where a third party holds funds in a secure account until the transaction conditions are met.

Significant Payment Service Providers (SPSPs)

Significant Payment Service Providers (SPSPs) are entities that have a major impact on the market, either due to their size, scale, or operational reach. These PSPs are subject to stricter compliance and oversight standards to ensure that their operations remain transparent and secure.

Conditions for PSPs to be Designated as Significant PSPs:

CriteriaConditionThreshold
Payment ServicesThe PSP must provide one or more payment services (excluding e-money account issuance service)$2 million (for one service) or $4 million (for two or more services)
E-money Account Issuance ServiceIf the provider offers e-money account issuanceAverage daily value of all e-money stored exceeds $3 million
E-money Issuance ServiceIf the provider offers e-money issuance serviceAverage daily value of e-money issued exceeds $3 million

Note:

  • All thresholds are calculated based on averages over a calendar year.
  • The values are measured in Specified Foreign Currency.

Regular Payment Service Providers (RPSPs)

Regular Payment Service Providers (RPSPs) are entities that offer designated payment services but do not meet the criteria to be classified as significant PSPs. These providers contribute to the financial ecosystem by offering various payment services but do not have the same level of operational impact as significant PSPs.

Eligible Activities of RPSPs:

  • Account Issuance Service (including e-money account issuance)
  • E-money Issuance Service
  • Escrow Service
  • Cross-Border Money Transfer Service
  • Merchant Acquisition Service

RPSPs can still play a pivotal role in the economy by enabling small to medium-sized businesses to accept payments digitally and offer financial services in niche markets.

Net worth 

Type of ProviderInitial Net Worth RequirementNet Worth Requirement by 3rd Financial Year
Regular Payment Service ProviderRegular Payment Service ProviderUSD 100,000 (or equivalent in a specified foreign currency)USD 200,000 (or equivalent in a specified foreign currency)
Significant Payment Service ProviderUSD 250,000 (or equivalent in a specified foreign currency)USD 500,000 (or equivalent in a specified foreign currency)

Steps for Setting Up Payment Service Providers (PSPs) in GIFT City 2025

Setting up a Payment Service Provider (PSP) in GIFT City involves a structured process with several steps. Each step is crucial for ensuring legal compliance and operational readiness. This guide outlines the steps involved in setting up a PSP in GIFT City, starting from engaging with regulators to commencing operations.

Pre-Registration Process

  1. Discuss Use Case with Regulators
    • Initial Consultation: Before applying, businesses must first discuss their use case with the regulators, ensuring that the business model complies with GIFT City’s regulatory framework. Engaging with regulators early ensures that the proposed operations align with the requirements set by the International Financial Services Centres Authority (IFSCA).
  2. Name Reservation for New Company
    • Legal Requirements for Name Registration: The name must be unique and should not conflict with existing entities. It should also align with GIFT City’s branding guidelines.
    • Steps to Reserve a Company Name in GIFT City:
      • Choose a Name: Select a name that reflects your business type and aligns with the brand of GIFT City.
      • Apply Online: Submit your application via the SWIT portal (GIFT City’s official registration platform).
      • Approval: Once approved, the name will be reserved for a specified period during which company incorporation must be completed.
  3. Premises Allotment and Issuance of PLOA (Possession Letter of Allotment)
    • Role of SEZ Developer: The SEZ developer plays a crucial role in providing the land and premises within GIFT City. They will assist in the allocation of office space and ensure the property adheres to SEZ regulations.
    • How to Obtain PLOA in GIFT City:
      • Submit Application: Apply for office space allocation through the SEZ developer.
      • Document Submission: Provide necessary documents such as your company’s incorporation certificate and proof of address.
      • Receive PLOA: Once approved, you will receive the Possession Letter of Allotment (PLOA), confirming your right to occupy the premises.
  4. Incorporation of the Company
    • Legal Structure for Setting Up a PSP: Most PSPs opt for a Private Limited Company or Limited Liability Partnership (LLP) as the legal structure.
    • Essential Documents Required:
      • Memorandum of Association (MoA) and Articles of Association (AoA)
      • Identity and address proofs of directors
      • Business plan outlining the services offered
      • PLOA from the SEZ developer

Application and Approval Process

  1. Application Before SEZ (IFSCA Admin) and IFSCA via SWIT Portal
    • Detailed Explanation of the Application Procedure:
      • Submit Application: Submit the detailed application via the SWIT portal, describing your business and the proposed PSP operations.
      • Application Form: Provide information about your company, key personnel, business structure, and services.
      • Key Documents Required:
        • Company incorporation certificate
        • PLOA
        • Business plan and financial details
        • KYC details for directors and shareholders
  2. Review and Grant of In-Principle Approval
    • What is In-Principle Approval, and Why is it Crucial?: In-principle approval is a preliminary step by IFSCA that confirms the initial acceptance of the business model and operations plan, moving the application closer to final approval.
    • Timeline and Expected Steps Post-Approval:
      • Approval Timeline: The in-principle approval process typically takes 4 to 6 weeks.
      • Post-Approval Steps: After obtaining in-principle approval, businesses must meet certain regulatory requirements to advance to the final approval stage.

Final Approval and Certification

  1. Complying with IFSCA Conditions for Final Approval
    • Key Conditions to Be Met for Final Certification:
      • Ensure compliance with all IFSCA regulatory requirements.
      • Submit final documentation, including tax filings, operational plans, and internal controls.
    • Role of IFSCA in Ensuring Compliance: IFSCA conducts thorough checks to ensure that your company complies with financial, operational, and data security regulations.
  2. Granting of Certificate of Authorisation (Final Approval)
    • What Does the Certificate of Authorisation Signify?: The Certificate of Authorisation signifies that the PSP is fully authorized to operate within GIFT City under IFSCA’s regulations.
    • Post-Approval Steps and Timelines: Upon receiving the Certificate of Authorisation, PSPs can begin their operations. However, they must meet final operational readiness checks within six months.

PSP Operation Commencement in GIFT City

  1. Commencing Operations Within Six Months
    • Overview of Operational Readiness: After final approval, PSPs must ensure that all operational infrastructure, such as payment systems and customer support, is set up and functioning.
    • Final Checklist for Beginning PSP Services in GIFT City:
      • Install technology infrastructure (payment gateways, security systems, etc.)
      • Set up a local team for operations and customer service
      • Test payment systems and security protocols
      • Complete all legal and tax registrations to comply with GIFT City regulations
Payment Service Providers Setup in GIFT City IFSC
Setting Up Payment Service Providers (PSPs) in GIFT City IFSCA 7

Payment Service Providers(PSPs) Regulation in GIFT City

Regulatory Framework for Payment Service Providers in GIFT City

GIFT City offers a comprehensive regulatory framework designed to support Payment Service Providers (PSPs), governed by the International Financial Services Centres Authority (IFSCA). This framework aims to foster innovation while ensuring PSPs comply with global standards for financial services.

IFSCA Regulatory Guidelines for PSPs

  • Overview of IFSC Regulations for PSPs:
    • IFSCA provides a flexible yet robust regulatory structure for PSPs, offering a favorable environment for businesses engaged in payments, remittance services, e-wallets, and digital financial services.
    • The regulations are tailored to ensure that PSPs operate efficiently, with a focus on financial integrity, consumer protection, and market stability.

Key Compliance Requirements for PSPs in GIFT City

PSPs must meet specific compliance obligations to operate in GIFT City:

  • Know Your Customer (KYC): PSPs must implement strict KYC protocols to verify the identities of customers and prevent fraud.
  • Anti-Money Laundering (AML): PSPs are required to have measures in place to detect and prevent money laundering activities.
  • Data Security: Compliance with data protection laws is essential, ensuring customer data is secure and transactions are protected.
  • Operational Requirements: PSPs must establish robust financial systems to handle transactions, settlements, and reconciliations efficiently.

Payment Service Providers’ Operational Requirements

  • Mandatory Licenses and Registrations:
    • PSPs must obtain licenses from IFSCA to provide payment services, including remittance and digital wallet operations.
  • Ongoing Compliance and Reporting Obligations:
    • PSPs in GIFT City must adhere to ongoing reporting and audit requirements, including regular financial disclosures, compliance reports, and updates on operations.
    • Regular inspections by IFSCA ensure that PSPs remain compliant with all regulatory standards.

Tax Benefits for PSPs in GIFT City

One of the most attractive aspects of setting up a PSP in GIFT City is the tax incentives and financial benefits that businesses can leverage. These incentives are designed to encourage growth, innovation, and investment within the International Financial Services Centre (IFSC).

Tax Incentives in GIFT IFSC

  • Income Tax Exemptions and Deductions Available for PSPs:
    • 100% Income Tax Exemption for any ten consecutive years out of first fifteen years of operation
    • GST Exemption on services provided within GIFT IFSC and abroad.
  • Other Financial and Operational Incentives:
    • No Minimum Tax: PSPs operating in GIFT City are not subject to minimum taxes, enhancing profitability where the PSPs are opting for a beneficial taxation regime.
    • Customs Duty Exemptions: Businesses can import equipment and technology needed for payment processing without incurring customs duties subject to conditions.

FEMA Compliance and Guidelines for PSPs in GIFT IFSC

  • Cross-Border Financial Regulations for PSPs:
    • FEMA (Foreign Exchange Management Act) ensures that cross-border transactions adhere to India’s foreign exchange guidelines, enabling PSPs to process international payments smoothly.
    • PSPs must comply with IFSC regulations and FEMA guidelines when dealing with foreign currency transactions and international money transfers pertaining to resident indians.
  • Foreign Exchange Management for International Transactions:
    • PSPs are required to manage foreign exchange operations in compliance with FEMA regulations, ensuring that foreign currency transactions are handled efficiently and securely.
    • PSPs in GIFT IFSC can offer foreign exchange services for global transactions, remittances, and cross-border payments with fewer regulatory barriers compared to other regions in India.

Minimum Net Worth Requirements

The net worth requirements for Payment Service Providers (PSPs) in GIFT IFSC depend on whether they are classified as a Regular or Significant PSP.

CategoryMinimum Net Worth RequirementTimeline

Regular PSP		₹8,200,000 (on commencement)At start of operations
₹16,400,000 (by end of the third financial year)By March 31 (third year)

Significant PSP		₹20,500,000 (within 90 days of designation)Within 90 days of designation
₹41,000,000 (by end of the third financial year)By March 31 (third year)

Regulatory Fees for PSPs in GIFT IFSC

IFSCA Fees

ParticularsRegular PSPSignificant PSPPayment System Operators (PSO)
Application Fees (One-Time)USD 1000USD 1000USD 1000
Authorization FeesUSD 25,000 (One-Time)USD 25,000 (One-Time)(a) Real time or deferred large value payment system – USD 15,000(b) Trade Repository – USD 5,000(c) Issuers of Legal Entity Identifier (LEI) – USD 10,000(d) Card Payment Networks – USD 15,000(e) TREDS platforms authorised under the Payment and Settlement Systems Act, 2007 – USD 5,000(f) Any Other – USD 15,000
Recurring FeesUSD 5,000 (Annual)USD 10,000 (Annual)(a). Real time or deferred large value payment system – USD 10,000(b). Trade Repository – USD 5,000(c). Issuers of Legal Entity Identifier (LEI) – USD 5,000(d). Card Payment Networks – USD 15,000(e). TREDS platforms authorised under the Payment and Settlement Systems Act, 2007 – USD 10,000(f). Any Other – USD 10,000

Note: All the fees mentioned above is on annual basis

SEZ Authorities’ Fees

ParticularsAmount (INR)
Application Fees (One-Time)₹5,000
Registration Fees (One-Time)₹25,000
Recurring Fees (Annual)₹5,000

These net worth requirements and regulatory fees ensure that PSPs in GIFT IFSC are financially stable and compliant with local regulations.

Main Functions of Payment Service Providers (PSPs)

Payment Service Providers (PSPs) play a critical role in enabling businesses to accept payments and manage financial transactions. Their main functions include:

  • Payment Processing: Facilitates businesses and merchants in receiving payments via credit and debit cards from customers.
  • Global Transactions: Ensures safe, efficient, and cost-effective international transactions, solidifying GIFT City as a key fintech hub.
  • Digital Wallets & Prepaid Cards: Provides consumers with digital wallets and prepaid cards to carry, send, and spend virtual money seamlessly.

Pre-Requisites for PSPs in GIFT IFSC

Before applying for approval in GIFT City, PSPs must meet the following requirements:

  1. Infrastructure: Adequate office space, equipment, and communication facilities within the GIFT City investment zone.
  2. Net Worth: Must satisfy the financial net worth criteria.
  3. Financial Soundness: Applicants must demonstrate financial stability and meet fit and proper requirements.
  4. Authorization History: The applicant or its affiliates must not have been denied authorization in the past.
  5. Relevant Experience: The applicant’s team must have adequate experience, including previous authorizations for similar services.

Benefits of Setting Up Payment Service Providers in GIFT City

Tax and Legal Benefits

Tax Benefits for PSPs in GIFT City

Setting up a Payment Service Provider (PSP) in GIFT City offers significant tax benefits under the International Financial Services Centre (IFSC) framework:

  • Income Tax Exemption: PSPs are eligible for a 100% income tax exemption for any 10 consecutive years out of the first 15 years of operation.
  • GST Benefits: Services rendered to entities within the GIFT IFSC or to clients outside India are exempt from GST.
  • No Minimum Alternate Tax (MAT): PSPs in GIFT City are not subject to minimum tax provisions, allowing them to fully leverage the favorable tax structure and maximize profitability.

Legal Framework for PSPs in GIFT IFSC

  • Simplified Legal Processes: The legal processes in GIFT City are designed to be business-friendly, with reduced red tape for PSPs.
  • Ease of Doing Business: The IFSCA ensures a smooth regulatory environment, making it easier for PSPs to comply with legal requirements and start operations swiftly.

Access to Global Financial Markets

Global Market Connectivity

  • Leverage GIFT City for International Integration: PSPs in GIFT City can easily integrate into global financial markets, facilitating cross-border transactions and serving international clients.
  • Serving International Clients: GIFT City offers international connectivity, enabling PSPs to tap into global markets and increase their clientele.

Reduced Operational Costs and Time Efficiency

  • Cost-Effectiveness: Establishing a PSP in GIFT City is more affordable compared to other locations, thanks to tax incentives and operational savings.
  • Streamlined Operations: The operational procedures in GIFT City are designed for speed and efficiency, ensuring that businesses can start quickly and scale easily.

Family Office in GIFT IFSC & Setting up FIF

Posted on by Treelife

The Indian government has recently relaxed the regulations for family offices in the International Financial Service Centre (IFSC), making it an attractive option for wealthy families looking to manage their wealth and invest globally. Family offices in IFSC can set up a Family Investment Fund (FIF), which is a self-managed fund that can pool money from a single family and invest in a variety of assets, including equities, debt, and real estate. However, before getting into the benefits and details, it is important to understand what is a Family Office and What is IFSC

What is a Family Office?

A family office is a privately held company that handles investment management and wealth management for a wealthy family with the goal being to effectively grow and transfer wealth across generations.

Family offices can be either single-family offices or multi-family offices. A single-family office is owned and operated by a single family, while a multi-family office is owned and operated by multiple families.

What is International Financial Service Centre (IFSC)?

An International Financial Services Centre (IFSC) is a special economic zone that is designed to attract foreign investment in financial services. An International Financial Services Centre (IFSC) caters to customers outside the jurisdiction of domestic economy. Such centres deal with the flow of finance, financial products and services across the borders. The IFSC offers a wide range of financial services, including Banking, Insurance, Asset management, Commodity trading, Derivatives trading, Foreign exchange trading, Stock broking.

IFSC typically offer a number of benefits to financial institutions, such as:

  • Favourable Tax Regime
  • Liberal Regulatory Environment
  • Strong Infrastructure
  • Skilled Workforce

An IFSC as envisaged under the Indian context “is a jurisdiction that provides financial services to non-residents and residents (institutions) in any currency other than Indian Rupee (INR)”

An IFSC is set up to undertake financial services transactions that are currently carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions.

Residential Status of Units in IFSC

  • Under Foreign Exchange Management regulations (FEMA) – Treated as Non-Resident
  • Under Income tax laws – Treated as Resident

IFSC in India

The first IFSC in India is the Gujarat International Finance Tec-City (GIFT City), which is located in Gandhinagar, Gujarat. GIFT City was established in 2015 and it is currently home to over 100 financial institutions.

In India, an IFSC is approved and regulated by the Government of India under the Special Economic Zones Act, 2005. Government of India has approved GIFT City as a Multi Services Special Economic Zone (‘GIFT SEZ’) and has also notified this zone as India’s IFSC. The launch of the IFSC at GIFT City is the first step towards bringing financial services transactions relatable to India, back to Indian shores

Family Offices in India and Family Investment Funds

India’s financial wealth is projected to reach USD $5.5 trillion by 2025, at a growth rate of 10% annually. India is also witnessing a surge in US-dollar millionaires, expected to double by 20262. As a result, there is a growing need for family offices.

The IFSCA has provided formal recognition to family offices through the IFSCA (Fund Management) Regulations, 2025, encouraging Indian family offices to establish FIFs in GIFT City to compete globally with hubs like Singapore and Dubai.

As per FM Regulations, FIF and Single family is defined as follows:

TermsDescription
Family Investment FundA self-managed fund pooling money only from a single family and has been set up in terms of International Financial Services Centre Authority (Fund Management) Regulations, 2025
Single FamilyA group of individuals who are the lineal descendants of a common ancestor and includes their spouses (including widows and widowers, whether remarried or not) and children (including stepchildren, adopted children, ex nuptial children); Single family shall also include entities such as sole proprietorship firm, partnership firm, company, LLP, trust or a body corporate, in which an individual or a group of individuals of a single family exercises control and directly or indirectly hold substantial economic interest “substantial economic interest” shall mean at least 90% economic interest, as demonstrated by FIF in an appropriate manner to the satisfaction of IFSCA which may, inter alia, include:
– % of shareholding in case of a company with share capital; or right to exercise control in case of a company without share capital;
– % share of profits in case of partnership firm and LLP;
– % of beneficial interest specified in trust deed in case of a determinate trust; or pro-rata share in the trust property in case of an indeterminate trust; or – any other manner as may be demonstrated to the satisfaction of IFSCA
Family Office in GIFT IFSC & Setting up FIF
Family Office in GIFT IFSC & Setting up FIF 11

Key Aspects of an FIF

TermsParticulars
RegistrationFIF to be registered with IFSCA as an Authorized Fund Management Entity (FME)
Possible FormFIF can be incorporated in any of the following forms : – Company or – Trust* or – LLP * In case of a trust, the following needs to be kept in mind:  (a) beneficiaries should be identifiable in the Trust deed (though not specifically named) (b) each beneficiary’s share should be capable of being determined based on the provision/formula mentioned in the trust deed (should not be at the discretion of the trustee) (c) any addition of further contributors to the Trust in addition to the initial contributors, shall not make the existing beneficiaries unknown or their shares indeterminate.
Minimum CorpusMinimum corpus requirement is USD 10 million to be met and maintained within 3 years from registration
TenureThe tenure of the FIF can be open ended or close ended depending on family requirements
Investment LimitsFor Resident Individuals -To invest under LRS which is capped at USD 250,000 per person per financial year.
For Indian Entity – 50% of the net worth
Undertaking to POBefore the FIF commences investment activities, all individuals of a single family who contribute to the FIF directly or indirectly, shall give an undertaking to the Principal Officer, to the effect that they understand the risks, costs and benefits of investing in the FIF and that the usual investor protection measures such as disclosures, regulatory inspection and supervision, etc., may not be available to the same extent to the FIF as they are to other schemes in IFSC.
BorrowingFIF may borrow funds or engage in leveraging activities as per their risk management policy
Setting up additional invesmtent vehiclesFIF may set-up additional investment vehicles (company / LLP / Trust / other form as specified by IFSCA) subject to prior approval of IFSCA and payment of fee as applicable to a FIF. Such additional vehicles shall also be considered as part of the FIF for the purpose of meeting the requirements specified in the regulations

Tax and Exchange Control Regulations

TermsParticulars
Taxation of Income100% exemption of Business income for 10 consecutive years out of 15 years
Capital gain on investments can be characterized as business profits, subjective
MAT/AMTWhere FIF set up as a company – No MAT
Where FIF set up as an LLP – AMT of ~10.48% (including surcharge and cess)
TCSTCS provisions should not apply to OPI remittances (other than LRS)
Amount of InvestmentFor individuals – LRS limits of USD 250,000 per annum
For unlisted company / LLP / firms – Can invest upto 50% of networth under OPI (Refer Annexure 3 for more details)

Pre-Requisites for FIF Application

1. Principal officer (PO)

  • The applicant shall designate a principal officer who shall be responsible for overall activities of the FME including but not limited to fund management, risk management and compliance.
  • PO to be based out of IFSC
  • PO to meet following experience:
    • A professional qualification or post-graduate degree or post graduate diploma (minimum 1 year in duration) in finance, law, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university or an institution recognised by Government or a recognised foreign university or institution or association or a CFA or a FRM from Global Association of Risk Professionals; and
    • An experience of at least 5 years in related activities in the securities market or financial products including in a portfolio manager, fund manager, investment advisor, broker dealer, investment banker, wealth manager, research analyst, credit rating agency, market infrastructure institution, financial sector regulator or consultancy experience in areas related to fund management, such as deal due diligence, transaction advisory or similar activities (consultancy experience will be considered for a maximum period of 2 years and experience in other areas shall be required for at least 3 years).
  • Any changes to PO to be intimated to IFSCA

2. Other Personnel FIF is required to appoint other personnel commensurate to the size of its operations and activities.

3. Fit and Proper The Applicant, PO, directors/ partners/ designated partners, key managerial personnel and controlling shareholders shall be fit and proper persons, at all times. A person shall be deemed to be a fit and proper person if :-

  1. such person has a record of fairness and integrity, including but not limited to-
    • financial integrity;
    • good reputation and character; and
    • honesty
  2. such person has not incurred any of the following disqualifications –
    • the person has been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against securities laws;
    • a recovery proceeding has been initiated against the person by a financial regulatory authority and is pending;
    • an order for winding up has been passed against the person for malfeasance;
    • the person has been declared insolvent and not discharged;
    • an order, restraining, prohibiting or debarring the person from accessing or dealing in financial products or financial services, has been passed by any regulatory authority, and a period of three years from the date of the expiry of the period specified in the order has not elapsed;
    • any other order against the person, which has a bearing on the securities market, has been passed by the Authority or any other regulatory authority, and a period of three years from the date of the order has not elapsed;
    • the person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;
    • the person is financially not sound or has been categorized as a wilful defaulter;
    • the person has been declared a fugitive economic offender; or
    • any other disqualification as may be specified by the Authority.

4. Infrastructure

  • FIF should have necessary infrastructure like adequate office space, equipment, communication facilities and manpower to effectively discharge its activities
  • The infrastructure requirements should be commensurate to the size of its operations in IFSC
  • The office should be dedicated, secured and accessible only by authorised persons of the FIF

5. Period of Validity The certificate of registration of FIF would remain valid for such period as may be specified by IFSCA unless it is suspended or cancelled by IFSCA or surrendered by FIF and taken on record by IFSCA

Sharing Economic Interest with Stakeholders

  • An FIF cannot seek money from individuals / entities outside of the single family. However, FIF may share economic interest with its employees, directors, FME or other persons providing services to the FIF, as per its internal policy to reward the persons providing services to the FIF or to align the interest of such persons with those of the FIF.
  • The FIF may accept contributions from the aforementioned persons for the limited purpose of granting economic interest to them, which in no case shall exceed an aggregate of 20% of FIF’s profits. Also, such external persons should be informed of the risks of investment in the FIF.

Family Office in GIFT IFSC & Setting up FIF
Family Office in GIFT IFSC & Setting up FIF 12

Exit for stakeholders with Economic Interest

  • Exit may be offered by any person / group of persons from the single family who already holds interest in FIF
  • Price for acquisition should not be less than the price determined by an independent third-party service provider such as a fund administrator or custodian registered with the IFSCA, a valuer registered with IBBI or such other person as may be specified by IFSCA.
  • Such service provider shall take into account the following factors:
    • highest price paid by any person for acquiring any interest in FIF during the last 12 months;
    • the fair price of the FIF, to be determined after taking into account valuation parameters including return on net worth, book value, earning per share, price earning multiple vis-à-vis the industry average, and such other parameters as are customary for valuation of such entities.
  • Service provider shall also provide a valuation report giving justification for such valuation.

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