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Strategic Management and Corporate Finance · An Overview on Listing and Issuance of Securities in International Financial Services Centre

Overview of International Financial Services Centre (IFSC) and GIFT City

Updated 11 October 2026 · Fact-checked

An International Financial Services Centre (IFSC) is a centre set up under section 18 of the Special Economic Zones Act, 2005, where financial products and services are dealt in specified foreign currency and regulated by the IFSC Authority under the IFSCA Act, 2019. GIFT City, Gujarat, is India's IFSC. In exams, define it, list products and services, and state the benefits.

Understand Overview of International Financial Services Centre

Think of an IFSC as a financial zone that sits inside India but is treated differently for financial business. Indian and foreign institutions can offer global financial services there, mainly to non-residents and in foreign currency, under one dedicated regulator. The idea is to bring to India financial business that otherwise goes to overseas hubs.

The IFSCA Act, 2019 defines it. An International Financial Services Centre means an IFSC set up, before or after the Act's commencement, under section 18 of the Special Economic Zones Act, 2005. The Act applies to such centres. GIFT City (Gujarat International Finance Tec-City) is the IFSC in India that you should name in answers.

The Act regulates financial products, financial services and financial institutions in the IFSC. A financial institution is a unit set up in an IFSC that renders financial services in respect of any financial product. Financial products include securities, contracts of insurance, deposits, credit arrangements, and foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately. The Central Government can notify other products.

Financial services are listed widely: buying, selling or subscribing to a financial product; accepting deposits; safeguarding and administering assets; effecting insurance contracts; managing assets of others; operating an investment scheme; maintaining ownership records; underwriting; providing information on creditworthiness; payment services; arranging such services; and giving advice or soliciting on them. The Central Government can notify more.

Three features give an IFSC its character. One regulator, the International Financial Services Centres Authority, a body corporate with perpetual succession and a common seal. Transactions of financial services must be in such foreign currency as specified by regulations in consultation with the Central Government (section 20). And the Central Government may, by notification, disapply or modify other Central Acts for IFSCs (section 31). Together these make doing business in the IFSC simpler. Do not quote tax or other incentives with figures unless you are sure of them.

Key rules to remember

Definition of IFSC
IFSC = centre set up under section 18 of the SEZ Act, 2005 (before or after the IFSCA Act, 2019)
Section 3(1)(g) of the IFSCA Act. Quote the SEZ Act link in every definition.
Financial product (section 3(1)(d))
Securities + contracts of insurance + deposits + credit arrangements + foreign currency contracts (other than immediately settled currency exchange) + any product notified by the Central Government
Learn the six heads in this order.
Financial institution (section 3(1)(c))
Unit set up in an IFSC + rendering financial services in respect of any financial product
Both conditions are needed.
Functions of the Authority (section 12)
Develop and regulate financial products, services and institutions in IFSCs
Includes regulating those already permitted by any regulator before commencement, those notified by the Central Government, and recommending further products to it.
Currency of transactions (section 20)
Every financial services transaction in an IFSC is in the foreign currency specified by regulations, in consultation with the Central Government
Not in rupees by default.
Power to modify other laws (section 31)
Central Government notification: other Central Act provisions either do not apply, or apply with exceptions, modifications and adaptations
Draft is laid before Parliament for 30 days in total, in one or more sessions.
Powers of other regulators (section 13)
Powers of regulators in the First Schedule are exercised by the Authority in the IFSC, for regulation of financial products, services and institutions
Penalties are collected in foreign currency equivalent and credited to the Consolidated Fund of India in rupees.

How to solve Overview of International Financial Services Centre questions

Use this order for any question on IFSC or GIFT City. It covers the theory and the case-based format.

  1. 1Define the IFSC using section 3(1)(g) of the IFSCA Act, 2019 and link it to section 18 of the SEZ Act, 2005. Name GIFT City.
  2. 2State the regulator: the International Financial Services Centres Authority, and its main duty under section 12.
  3. 3Identify what the question asks about: financial product, financial service, financial institution, or benefits.
  4. 4List the relevant items from the statutory definitions and match each fact in the case to one of them.
  5. 5Apply the special features: foreign currency transactions, one regulator, power to modify other Acts.
  6. 6Give a clear conclusion tied to the facts, for example whether the activity is a financial service in the IFSC.
  7. 7Close with the practical point, such as the unit being a financial institution that must deal with the Authority.

Quickest way: D-R-P-B in four lines

When to use it: For short notes and 5-mark questions when time is limited.

  1. D: Definition, section 3(1)(g) with SEZ Act section 18, and GIFT City.
  2. R: Regulator, the IFSC Authority, and section 12 duty.
  3. P: Products and services, from sections 3(1)(d) and 3(1)(e).
  4. B: Benefits, namely a single regulator, foreign currency dealing, and modified application of other laws, with a note that exact incentives should be taken from the study material.

Common mistakes in Overview of International Financial Services Centre

  • Saying an IFSC is set up under the IFSCA Act, 2019.

    The Act's name contains IFSC, so students link it to the setting up.

    Fix: The centre is set up under section 18 of the SEZ Act, 2005. The IFSCA Act regulates it.

  • Listing only securities as financial products.

    Students think of stock exchanges only.

    Fix: Remember all six heads: securities, insurance, deposits, credit arrangements, foreign currency contracts and notified products.

  • Writing that transactions in an IFSC are in rupees.

    Students assume Indian currency applies.

    Fix: Section 20 requires foreign currency as specified by regulations.

  • Treating the Authority as only a recommending body.

    Section 12(2)(c) mentions recommending, and students stop there.

    Fix: The Authority develops and regulates under section 12(1), and exercises the powers of other regulators under section 13.

  • Stating that any Act automatically applies or never applies in the IFSC.

    Students ignore section 31.

    Fix: Other Central Acts apply unless the Central Government notifies non-application or modified application.

  • Quoting incentive figures from memory.

    Students copy numbers from articles.

    Fix: Write benefits in general terms unless the study material gives the figure.

Worked examples

Example 1

Explain what an International Financial Services Centre is and name the legal provisions that define it and its regulator.

Show the solution
  1. Definition: section 3(1)(g) of the IFSCA Act, 2019 says it is an IFSC set up, before or after commencement, under section 18 of the Special Economic Zones Act, 2005.
  2. Application: section 2 makes the Act apply to IFSCs set up under that section.
  3. Regulator: section 4 establishes the International Financial Services Centres Authority as a body corporate with perpetual succession and a common seal.
  4. Duty: section 12(1) makes it the Authority's duty to develop and regulate financial products, services and institutions in IFSCs.
  5. Example: GIFT City in Gujarat is India's IFSC.

Answer: An IFSC is a centre set up under section 18 of the SEZ Act, 2005, to which the IFSCA Act, 2019 applies. It is regulated by the International Financial Services Centres Authority, which develops and regulates financial products, services and institutions there. GIFT City is the example.

Example 2

Sagar Finserve Ltd. sets up a unit in GIFT City that accepts deposits and underwrites the subscription of securities, with all dealings in US dollars. Is it a financial institution and are its dealings permitted in dollars?

Show the solution
  1. Test of financial institution (section 3(1)(c)): a unit set up in an IFSC rendering financial services in respect of a financial product.
  2. Accepting deposits is a financial service under section 3(1)(e)(ii). Deposits are a financial product under section 3(1)(d)(iii).
  3. Underwriting issue or subscription of a financial product is a financial service under section 3(1)(e)(ix). Securities are a financial product.
  4. Currency: section 20 requires financial services transactions in an IFSC to be in the foreign currency specified by regulations in consultation with the Central Government. US dollars are fine if specified.
  5. Regulator: the unit's regulation falls to the Authority.

Answer: Yes. The unit is a financial institution because it is set up in an IFSC and renders financial services in respect of financial products. Dealing in US dollars is consistent with section 20, provided dollars are among the currencies specified by regulations.

Exam tips

  • Begin every answer with the section 3(1)(g) definition and the SEZ Act link. It earns easy marks.
  • In case questions, match each activity to a clause of section 3(1)(e) by number.
  • Keep the benefits section general and logical rather than citing figures you cannot verify.
  • Mention section 31 whenever the question hints at the application of other laws in the IFSC.
  • Use bullet lists for products and services so the examiner can tick them quickly.

Practice questions from An Overview on Listing and Issuance of Securities in International Financial Services Centre

Overview of International Financial Services Centre in other exams

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

Overview of International Financial Services Centre: frequently asked questions

What is GIFT City in the context of IFSC?

GIFT City in Gujarat is India's International Financial Services Centre. Financial institutions set up units there and deal in financial products and services under the Authority's regulation.

Who regulates an IFSC?

The International Financial Services Centres Authority, established under section 4 of the IFSCA Act, 2019. It develops and regulates financial products, services and institutions in the IFSC.

Which financial products are covered in an IFSC?

Securities, contracts of insurance, deposits, credit arrangements, and foreign currency contracts other than immediately settled currency exchange. The Central Government can also notify other products.

Are Indian laws applicable in an IFSC?

Other Central Acts apply unless the Central Government notifies that they will not apply, or will apply with exceptions, modifications and adaptations under section 31. The draft notification is laid before Parliament.

In which currency are IFSC transactions carried out?

Section 20 requires financial services transactions to be in the foreign currency specified by regulations, made in consultation with the Central Government.