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Capital Market and Securities Laws · International Financial Services Centres Authority (IFSCA)

Powers, Functions and Finance of IFSCA

Updated 11 October 2026 · Fact-checked

IFSCA is the single regulator for financial products, services and institutions in an International Financial Services Centre. Section 12 sets its functions. Section 13 lets it exercise the powers of SEBI, RBI, IRDAI and PFRDA within the IFSC. It has its own Fund (section 15) and its accounts are audited by the CAG (section 16).

Understand Powers, Functions and Finance of IFSCA

An International Financial Services Centre (IFSC) is a zone set up under section 18 of the Special Economic Zones Act, 2005. Before the IFSCA Act, 2019, several regulators looked after businesses in an IFSC. The Act created one Authority, the International Financial Services Centres Authority, to replace this multi-regulator system inside the IFSC.

The Authority's functions are in section 12. Its duty is to develop and regulate financial products, financial services and financial institutions in the IFSC, by such measures as it deems fit. This includes regulating products, services and institutions permitted by any regulator before the Act began, and others the Central Government notifies. It also recommends to the Central Government other products, services and institutions that may be permitted in an IFSC, and performs other prescribed functions.

The powers are in section 13. The First Schedule lists appropriate regulators (such as SEBI, RBI, IRDAI and PFRDA) and the Acts they administer. Notwithstanding any other law, all powers those regulators have under those Acts are exercised by IFSCA in the IFSC, so far as they relate to regulating financial products, services or institutions. This is why IFSCA is called a unified regulator. The Central Government may amend the First Schedule by notification, and each such notification is laid before each House of Parliament.

Section 13(4) applies the procedures of those Acts, mutatis mutandis. These cover applications for registration, inspection, investigation, prosecution, settlement, compounding, adjudication, appeals, and fixing and recovering fees, fines and penalties. Penalties, fines, fees and settlement amounts are collected in the foreign currency equivalent, at the RBI rate on the date of the order. Sums realised as penalties or fines are credited to the Consolidated Fund of India in Indian rupees.

On finance, section 15 creates the IFSCA Fund, and section 16 requires proper accounts and audit by the Comptroller and Auditor-General of India (CAG).

Key rules to remember

Functions (section 12)
Develop and regulate financial products, financial services and financial institutions in the IFSC
Includes regulating items permitted earlier, items notified by the Central Government, recommending new items, and other prescribed functions.
Powers (section 13(1))
Powers of appropriate regulators under First Schedule Acts are exercised by IFSCA in the IFSC
Only so far as they relate to regulating financial products, services or institutions. Operates notwithstanding any other law.
Amending the First Schedule (section 13(2)-(3))
Central Government notification; laid before each House of Parliament
It can include or omit a regulator or a law.
Procedure borrowed (section 13(4))
Procedural provisions of the First Schedule Acts apply mutatis mutandis
Covers filing, inspection, investigation, prosecution, settlement, compounding, adjudication, appeals, fees, fines and recovery.
Currency of penalties (section 13(5)-(6))
Collected in foreign currency equivalent; credited to Consolidated Fund of India in rupees
Exchange rate is the RBI-notified rate on the date of the order.
Fund (section 15)
Credit: grants, fees, charges, and sums from sources decided by the Central Government. Application: salaries and other expenses
Fund is called the International Financial Services Centres Authority Fund.
Accounts and audit (section 16)
Proper accounts and annual statement; audited by CAG; sent to Central Government and laid before each House of Parliament
Form of accounts is prescribed by the Central Government in consultation with the CAG.

How to solve Powers, Functions and Finance of IFSCA questions

Use this method for any question on IFSCA's powers, functions or finance.

  1. 1Identify what is asked: functions (section 12), powers (section 13), fund (section 15) or accounts and audit (section 16).
  2. 2State the provision in plain words and cite the section.
  3. 3For powers, name the link: First Schedule regulators and their Acts, exercised by IFSCA only in the IFSC and only for regulating products, services or institutions.
  4. 4Add the supporting rules that fit the question, such as procedures applying mutatis mutandis, foreign currency collection or crediting to the Consolidated Fund.
  5. 5Apply the rule to the facts given, such as a fine imposed on an IFSC unit or an audit query.
  6. 6Close with a clear conclusion that answers the exact question.

Quickest way: Section-to-topic map

When to use it: Use when you have little time or the question is a short note or a one-line conclusion.

  1. Match the keyword to the section: functions 12, powers 13, fund 15, accounts and audit 16.
  2. Write one core line for the section, then two or three sub-points.
  3. End with the conclusion and the section number.

Common mistakes in Powers, Functions and Finance of IFSCA

  • Saying IFSCA replaces SEBI, RBI, IRDAI and PFRDA entirely.

    The phrase unified regulator is read too broadly.

    Fix: Say IFSCA exercises their powers only in the IFSC and only for financial products, services and institutions there.

  • Treating penalties as collected in rupees.

    Students assume Indian currency by default.

    Fix: Remember section 13(5): collected in foreign currency equivalent, at the RBI rate on the order date. Only after realisation are sums credited in rupees to the Consolidated Fund of India.

  • Writing that penalties go to the IFSCA Fund.

    Fund and penalties are mixed up.

    Fix: Penalties and fines go to the Consolidated Fund of India (section 13(6)). The IFSCA Fund gets grants, fees, charges and other notified sums (section 15).

  • Naming the wrong auditor, such as a chartered accountant firm.

    Companies are audited by CAs, so students assume the same here.

    Fix: Section 16 says the CAG, or a person appointed by him, audits the accounts.

  • Forgetting the Central Government's role in the First Schedule.

    Students think the list is fixed.

    Fix: State that the Central Government may include or omit regulators and laws by notification, laid before Parliament (section 13(2)-(3)).

Worked examples

Example 1

Explain how IFSCA acts as a unified regulator in an IFSC. Refer to the provisions of the IFSCA Act, 2019.

Show the solution
  1. Provision: section 13(1) says that, notwithstanding any other law, all powers exercisable by an appropriate regulator specified in the First Schedule, under the Acts listed against it, are exercised by IFSCA in the IFSC.
  2. Scope: this applies only so far as it relates to regulating financial products, financial services or financial institutions.
  3. Procedure: under section 13(4), the procedural provisions of those Acts apply mutatis mutandis. These cover registration, inspection, investigation, adjudication, appeals and fixing penalties.
  4. Flexibility: under section 13(2), the Central Government may amend the First Schedule by notification to add or omit a regulator or law, and the notification is laid before each House of Parliament.
  5. Supporting function: section 12 makes IFSCA responsible for developing and regulating these products, services and institutions.

Answer: IFSCA is a unified regulator because section 13 transfers to it, within the IFSC, the powers of the First Schedule regulators for financial products, services and institutions, with their procedures applying mutatis mutandis. Outside the IFSC, those regulators keep their normal role.

Example 2

IFSCA imposes a penalty on a financial institution in an IFSC. Where is it collected and credited? Also state who audits IFSCA's accounts.

Show the solution
  1. Collection: section 13(5) says penalties, fines, fees and settlement amounts are collected in the foreign currency equivalent of the amount imposed.
  2. Rate: the exchange rate is the one notified by the RBI on the date of the order imposing the penalty.
  3. Credit: under section 13(6), all sums realised as penalties or fines are credited to the Consolidated Fund of India in Indian rupees.
  4. Audit: under section 16(2), the CAG audits the Authority's accounts at intervals he specifies, and the Authority pays the audit expenses.
  5. Reporting: under section 16(4), the certified accounts with the audit report go annually to the Central Government, which lays them before each House of Parliament.

Answer: The penalty is collected in foreign currency at the RBI rate on the order date and credited in rupees to the Consolidated Fund of India. The CAG audits IFSCA's accounts, and the audited accounts are laid before Parliament.

Exam tips

  • Write the section number with each point. Section 12 is functions, 13 is powers, 15 is Fund, 16 is accounts and audit.
  • Questions often ask for short notes. Learn the section 13(4)-(6) points, since they are easy to miss.
  • Keep the Fund and the Consolidated Fund of India separate in your answer.
  • For a case-style question, give the provision, apply it to the facts, then conclude in one line.

Practice questions from International Financial Services Centres Authority (IFSCA)

Powers, Functions and Finance of IFSCA in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Powers, Functions and Finance of IFSCA: frequently asked questions

What are the main functions of IFSCA under section 12?

Its duty is to develop and regulate financial products, financial services and financial institutions in the IFSC. This includes items permitted earlier and items notified by the Central Government. It also recommends further items to the Central Government and performs other prescribed functions.

Which regulators' powers does IFSCA exercise in an IFSC?

It exercises the powers of the regulators listed in the First Schedule, under the Acts listed against them. SEBI, RBI, IRDAI and PFRDA are the regulators whose members sit on the Authority. Check the current First Schedule, as the Central Government can amend it.

What goes into the IFSCA Fund?

Under section 15, all grants, fees and charges received by the Authority under the Act go into it, along with sums from sources decided by the Central Government. The Fund pays salaries, allowances and the Authority's other expenses.

Who audits IFSCA and who sees the report?

The CAG, or a person he appoints, audits the accounts. The certified accounts and audit report go every year to the Central Government, which lays them before each House of Parliament.