IFSCA (Banking) Regulations, 2020

IFSC Banking Unit (IBU) licensing conditions, permissible activities and prudential norms.

Eligibility to set up an IBU

A parent bank must hold a valid banking licence in its home jurisdiction (an Indian bank under the Banking Regulation Act, or a foreign bank meeting IFSCA's home-regulator adequacy criteria) and obtain specific IFSCA authorisation for the IBU, which operates as a distinct unit rather than a full domestic branch.

Permissible activities

Wholesale lending and trade finance in foreign currency to persons resident outside India and to eligible IFSC entities; treasury and derivative operations; correspondent banking; and, subject to conditions, external commercial borrowing-linked lending to Indian resident borrowers — deposit-taking from resident retail customers below the notified threshold is not a core permitted activity.

Capital and prudential requirements

IBUs must maintain minimum capital and liquidity buffers set by IFSCA, broadly calibrated to Basel-framework principles but adapted to the IFSC's wholesale, foreign-currency-only operating model rather than a full domestic retail-bank capital regime.

Reporting

IBUs file periodic prudential and business returns to IFSCA; where the parent is an Indian bank, consolidated group reporting to RBI continues in parallel — IFSCA authorisation does not remove the parent bank's own regulator relationship for group-level supervision.

Educational summary of the IFSCA Act, 2019, its Regulations and IFSCA circulars as understood at review date 2026-07-18. Not a substitute for the official IFSCA Act/Regulations text, current circulars, or professional advice on a specific transaction.

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