Who Regulates GIFT City Investments

"Is my money actually safe in GIFT City, or is this another too-good-to-be-true scheme?"

This question lands in our inbox almost daily at Belong. And honestly, it's the smartest question an NRI can ask before investing a single dirham.

You've probably heard about GIFT City's tax-free USD fixed deposits and mutual funds. The returns sound attractive. 

But something holds you back. Who's watching over this place? What happens if a bank doesn't return your money? 

Can you actually complain to someone?

We get it. After years of seeing financial products marketed to NRIs that turned out to be problematic, skepticism is healthy.

Here's the truth: GIFT City operates under one of the most robust regulatory frameworks in India's financial history. 

A dedicated authority called IFSCA has been specifically created to oversee it. And the investor protection mechanisms are modeled after global financial hubs like Singapore and Dubai.

Let us walk you through exactly how regulation and protection work at GIFT City, so you can make an informed decision.

What is IFSCA and Why Was It Created?

Before April 2020, financial services in GIFT City were a regulatory puzzle.

If you wanted to open a bank account, RBI rules applied. For mutual funds, SEBI stepped in. Insurance? That was IRDAI's territory. Pension products fell under PFRDA.

Four different regulators. Four different rulebooks. Four different complaint mechanisms.

For NRIs trying to invest from Dubai or London, this was a nightmare. Nobody knew whom to approach for what.

The Government of India recognized this problem. On April 27, 2020, they established the International Financial Services Centres Authority (IFSCA) under the IFSCA Act, 2019.

IFSCA is now the unified regulator for all financial services in GIFT City. It combines the powers of RBI, SEBI, IRDAI, and PFRDA into one single authority.

This means one rulebook, one complaint portal, and one authority watching over your investments.

👉 Tip: Always verify that any financial entity you deal with at GIFT City is registered with IFSCA. You can check the IFSCA Directory on their official website.

How Does IFSCA Compare to RBI and SEBI?

Think of IFSCA as a super-regulator specifically designed for international finance.

In mainland India, RBI regulates banks while SEBI handles stock markets and mutual funds. They don't overlap.

But IFSCA can do everything these regulators do, but only within GIFT City's jurisdiction. This gives it tremendous flexibility to create investor-friendly rules while maintaining strict oversight.

The advantage for NRIs is clear. If something goes wrong with your GIFT City investment, you don't need to figure out which regulator to approach. IFSCA handles everything.

Understanding this difference between GIFT City and RBI regulations helps you appreciate why this unified structure matters.

What Financial Services Does IFSCA Regulate?

IFSCA's jurisdiction covers every financial service offered at GIFT City.

Banking Services: All IFSC Banking Units (IBUs) operating at GIFT City are licensed and supervised by IFSCA. This includes banks like ICICI, HDFC, SBI, Axis, and Federal Bank that offer USD accounts and fixed deposits to NRIs.

Fund Management: Mutual funds, alternative investment funds (AIFs), and portfolio management services all operate under IFSCA's Fund Management Regulations, 2025. These rules were recently updated to strengthen investor protections.

Capital Markets: The two stock exchanges at GIFT City, India INX and NSE IFSC, operate under IFSCA oversight. If you're trading derivatives or investing in global securities, IFSCA is watching.

Insurance: Life insurance, health insurance, and reinsurance products offered at GIFT City fall under IFSCA regulation.

Fintech Services: Payment service providers, robo-advisory platforms, and other fintech innovations require IFSCA authorization.

You can explore regulated GIFT City mutual funds and alternative investment funds through our tools to see what's available.

👉 Tip: IFSCA maintains a public directory of all registered entities. Before investing with anyone, verify their registration status directly on the IFSCA website.

Are GIFT City Bank Deposits Insured?

Here's something important that many NRIs don't know: deposits at GIFT City IBUs are not covered by India's Deposit Insurance and Credit Guarantee Corporation (DICGC).

According to ICICI Bank's GIFT City FAQs, "IBU deposits are not covered by Deposit Insurance."

Does this mean your money is at risk? Not quite.

GIFT City banks operate under a different safety model. Here's how your deposits are protected:

Prudential Norms: IBUs must maintain capital adequacy ratios and follow strict prudential guidelines prescribed by IFSCA under its Banking Regulations, 2020.

Parent Bank Strength: Most IBUs are branches of large, well-capitalized Indian banks. Your deposit is backed by the parent bank's entire balance sheet, not just the IBU's capital.

Regular Audits: IFSCA conducts regular inspections and requires annual compliance audits of all banking units.

Global Standards: IFSCA's banking regulations are aligned with Basel III norms followed by international financial centers worldwide.

For context, Singapore and Dubai's international financial centers also don't have deposit insurance. Instead, they rely on strong regulatory oversight and capital requirements.

If deposit insurance is essential for your peace of mind, you might consider NRI fixed deposits in mainland India where DICGC coverage up to ₹5 lakh applies. Our NRI FD rates comparison tool helps you compare options.

How Does GIFT City Protect Investors in Mutual Funds and AIFs?

IFSCA's Fund Management Regulations, 2025 include several investor protection mechanisms.

Minimum Corpus Requirements: Funds must maintain a minimum corpus of USD 3 million. This ensures operational viability and prevents undercapitalized schemes.

Mandatory Custodian Appointment: Fund managers must appoint an independent custodian to hold investor assets separately. Your investments don't sit in the fund manager's accounts.

NAV Computation by Independent Valuers: Net Asset Values must be calculated by independent service providers, not the fund manager. This prevents manipulation.

Pari-Passu Treatment: All investors in a scheme must be treated equally in distributions, with limited exceptions that require disclosure.

Related Party Transaction Limits: If a fund wants to transact with its associates or major investors, it needs approval from 75% of other investors. This protects minority investors from conflicts of interest.

KMP Certification Requirements: Key Managerial Personnel at fund houses must obtain certifications from IFSCA-specified institutions, ensuring professional competence.

These protections apply whether you're investing in equity funds, debt funds, or alternative investments like AIFs.

👉 Tip: When reviewing any GIFT City fund, check the Private Placement Memorandum (PPM) for the custodian details and grievance redressal mechanism. These are mandatory disclosures.

What is the Grievance Redressal Process at GIFT City?

If something goes wrong with your investment, here's exactly how you can seek resolution.

Step 1: Complain to the Service Provider

Start with the entity you're dealing with, whether that's a bank, fund house, or broker.

IFSCA's circular dated December 2, 2024 mandates that every regulated entity must have a Complaint Handling and Grievance Redressal Policy. This policy must be approved by their board and published on their website.

The entity must acknowledge your complaint within 2 working days and provide a response within 20 working days.

Step 2: Escalate to the Appellate Officer

If you're not satisfied with the initial response, you can escalate to the entity's Complaint Redressal Appellate Officer (CRAO). The CRAO must dispose of your appeal within 30 days.

Step 3: Approach IFSCA

If the internal mechanism fails, you can file a complaint directly with IFSCA.

Send an email to: grievance-redressal@ifsca.gov.in

IFSCA recommends filing within 21 days of receiving the entity's final decision.

For complaints against trading members, clearing members, or depository participants, you should first approach the relevant market infrastructure institution (like India INX or NSE IFSC) before escalating to IFSCA.

This process became effective from April 1, 2025, as per IFSCA's circular dated January 13, 2025.

What Enforcement Powers Does IFSCA Have?

IFSCA isn't just a paper regulator. It has real teeth.

Under Section 12 and Section 13 of the IFSCA Act, 2019, the authority can:

Issue Warnings and Advisories: For minor violations, IFSCA first issues warnings to give entities a chance to correct course.

Conduct Inspections: IFSCA can examine the books, records, and operations of any registered entity without prior notice.

Impose Penalties: For serious violations, IFSCA can levy financial penalties on entities and individuals.

Cancel Registrations: In extreme cases, IFSCA can cancel an entity's license, effectively shutting down their operations at GIFT City.

Bar Individuals: People found guilty of financial misconduct can be barred from holding key positions at any GIFT City entity.

According to a June 2025 analysis by Cyril Amarchand Mangaldas, IFSCA's enforcement approach "balances strict oversight with flexibility to support growth." The firm noted that IFSCA issues advisories and warnings to encourage compliance, but doesn't hesitate to cancel licenses when necessary.

This enforcement capability means bad actors face real consequences.

👉 Tip: Before investing, check if the entity has faced any regulatory actions. IFSCA publishes enforcement orders on its website.

How Does IFSCA Protect Against Fraud and Money Laundering?

Financial crimes are a serious concern for any international financial center. IFSCA addresses this through comprehensive Anti-Money Laundering (AML) regulations.

The IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 require all regulated entities to:

Conduct Customer Due Diligence: Before opening any account or accepting investments, entities must verify your identity and understand the source of your funds.

Risk Categorization: Entities must categorize customers based on risk profiles and apply enhanced due diligence for higher-risk cases.

Suspicious Transaction Reporting: Any unusual transaction patterns must be reported to the authorities.

Record Keeping: All transaction records must be maintained for at least eight years in retrievable electronic format.

These requirements mirror the Financial Action Task Force (FATF) standards followed by global financial centers.

For NRIs, this means going through a proper KYC process. While it might feel cumbersome, it's actually a sign that the entity takes compliance seriously.

Understanding the FEMA guidelines and RBI rules for NRI investments helps you prepare the right documentation.

What are Accredited Investors and Why Does It Matter?

IFSCA allows certain sophisticated investors to access products that aren't available to retail investors. These are called "accredited investors."

To qualify as an accredited investor in GIFT City, you typically need:

• Net worth exceeding a specified threshold (usually USD 1 million or equivalent)
• Income exceeding a specified level
• Professional experience in financial services

Why does this matter for investor protection?

If you qualify as an accredited investor and choose to invest in restricted schemes, IFSCA regulations require that you be informed about the limited investor protection available compared to retail products.

This is a transparency requirement. You're essentially acknowledging that you understand the higher risks involved in sophisticated products.

For most NRIs looking at USD fixed deposits or mutual funds, the standard retail investor protections apply. You don't need accredited investor status for these products.

How Safe Are Different GIFT City Products?

Let's rank GIFT City products by their safety profiles, based on the regulatory protections in place.

Tier 1: USD Fixed Deposits at IBUs

These are the safest GIFT City products for NRIs. They're offered by branches of established Indian banks, regulated under banking norms, and backed by parent bank balance sheets. Interest rates are fixed, and principal is guaranteed by the bank.

Explore current rates through our NRI FD rates tool.

Tier 2: GIFT City Mutual Funds

Regulated under the Fund Management Regulations, 2025 with mandatory custodian appointment and NAV valuation by independent parties. Diversified across multiple securities. Subject to market risk but with strong operational safeguards.

Browse options through our GIFT City mutual funds tool.

Tier 3: Alternative Investment Funds

Higher minimum investments (typically USD 75,000 or more). Less liquid than mutual funds. Subject to fund-specific risks. Suitable for sophisticated investors who understand private market investments.

Learn more through our GIFT City AIFs tool.

Tier 4: Derivatives and Trading Products

Requires active management. Subject to market volatility. Suitable for experienced traders. Track market movements through our GIFT Nifty tool.

For safe investment options, most NRIs start with USD fixed deposits before exploring other products.

👉 Tip: Match your investment choice to your risk tolerance. If you're investing retirement savings, stick to Tier 1 and Tier 2 products.

What Happens If You Want to Return to India?

Regulatory status matters a lot when you transition from NRI to resident.

Here's what you need to know:

Your GIFT City Accounts Continue: GIFT City accounts are available to both NRIs and resident Indians. You don't need to close them when you return.

Tax Treatment Changes: While you were an NRI, income from GIFT City was tax-free in India. Once you become a resident, your worldwide income becomes taxable.

RNOR Status Benefits: For two years after returning, you may qualify for Resident but Not Ordinarily Resident (RNOR) status. This provides transitional tax benefits.

IFSCA regulations don't change based on your residential status. The same investor protections apply whether you're an NRI or a resident.

Understanding what happens to your investments when returning to India helps you plan your transition properly.

What International Standards Does IFSCA Follow?

IFSCA doesn't operate in isolation. It actively collaborates with global regulators and follows international standards.

Memorandums of Understanding: IFSCA has signed MOUs with several international regulators, including the Australian Securities and Investments Commission (ASIC) in September 2025. These agreements facilitate information sharing and regulatory cooperation.

FATF Compliance: IFSCA's AML framework aligns with Financial Action Task Force recommendations, the global standard for combating money laundering and terrorist financing.

Basel III Alignment: Banking regulations incorporate Basel III capital adequacy and liquidity requirements.

IOSCO Principles: Securities regulations follow International Organization of Securities Commissions principles.

This international alignment serves two purposes. It ensures GIFT City meets global regulatory standards. And it helps when you need to demonstrate the legitimacy of your GIFT City investments to authorities in your country of residence.

What the Experts Say About IFSCA Regulation

Let's look at what independent legal and financial experts think about GIFT City's regulatory framework.

Khaitan & Co, a leading Indian law firm, noted in their August 2025 analysis that IFSCA has been "favourably considering industry demand" while "positioning the fund management regime in IFSC GIFT City as a fully developed and inclusive framework."

S\&R Associates, another prominent law firm, observed in their April 2025 update that the Fund Management Regulations 2025 "introduce investor-friendly measures, reduced entry barriers, and increased operational flexibility" while implementing "stronger safeguards for investor protection."

The general consensus among legal experts is that IFSCA has struck a reasonable balance between ease of doing business and investor protection.

Common Myths About GIFT City Regulation

Let's address some misconceptions we frequently encounter.

Myth 1: GIFT City is unregulated because it's an SEZ

Wrong. GIFT City has India's most unified regulatory framework for financial services. IFSCA's authority is established by an Act of Parliament, not just an administrative notification.

Myth 2: There's no recourse if something goes wrong

Wrong. IFSCA has a formal grievance redressal mechanism with specified timelines. Regulated entities can face penalties, license cancellations, and enforcement actions.

Myth 3: GIFT City is only for big investors

Wrong. While some products have minimum thresholds, USD savings accounts and fixed deposits are available with relatively small amounts. Opening an account at GIFT City is accessible for most NRIs.

Myth 4: Tax-free means no oversight

Wrong. Tax benefits and regulatory oversight are separate things. GIFT City products are tax-advantaged under the Income Tax Act, but they're still subject to full regulatory supervision by IFSCA.

Explore the complete picture of GIFT City advantages and considerations before making decisions.

How to Verify Any GIFT City Entity's Credentials

Before investing with anyone at GIFT City, here's your verification checklist:

Check IFSCA Registration: Visit ifsca.gov.in and search for the entity in the directory. Note the registration number and category.

Verify License Scope: Ensure the entity is authorized to offer the specific product you're interested in. A banking unit can't offer mutual funds, and a fund manager can't accept deposits.

Review Compliance History: Check for any regulatory orders or advisories against the entity.

Read the Grievance Policy: Visit the entity's website and locate their complaint handling policy. A legitimate entity will have this publicly available.

Confirm Physical Presence: Genuine GIFT City entities have physical offices in the GIFT SEZ. Verify the address.

This due diligence takes 30 minutes but can save you from potential problems.

👉 Tip: If an entity claims to be IFSCA-registered but doesn't appear in the official directory, that's a red flag. Report such cases to grievance-redressal@ifsca.gov.in.

The Bottom Line: Is GIFT City Safe for NRI Investments?

Based on the regulatory framework we've examined, here's our honest assessment.

The Strengths:

IFSCA provides unified, specialized regulation for international finance. Grievance redressal mechanisms exist with specified timelines. Enforcement powers are real and being used. International standards are followed. Major Indian banks operate the banking units.

The Considerations:

Deposits aren't covered by DICGC insurance (though parent bank backing provides implicit protection). The regulatory framework is relatively new (IFSCA was established in 2020). Some products require higher minimum investments.

Our Recommendation:

For NRIs looking at USD fixed deposits and mainstream mutual funds at GIFT City, the regulatory environment is robust and investor-friendly. The products offered by established banks and fund houses carry acceptable regulatory risk.

For more complex products like AIFs or derivatives, ensure you understand both the product risks and the specific investor protections that apply.

At Belong, we work exclusively with IFSCA-regulated entities and help NRIs navigate GIFT City investments with confidence. Our mutual funds offerings are fully compliant with IFSCA regulations.

Take the Next Step

Understanding regulation is just the first step. The real benefit comes from actually putting your money to work in a safe, tax-efficient way.

Thousands of NRIs in our WhatsApp community are already investing through GIFT City and sharing their experiences. Join them to get real answers from people who've done it.

Download the Belong app to explore IFSCA-regulated USD fixed deposits and mutual funds designed specifically for NRIs like you.