New IFSCA TechFin and Ancillary Services Regulations, 2025 – What AIFs Need to Know
Link to Circular: https://ifsca.gov.in/CommonDirect/GetFileView?id=21626bde60601ef44a0ed022013d2da8&fileName=264897_20250723_0122.pdf&TitleName=Legal
The International Financial Services Centres Authority (IFSCA) has announced a dedicated framework governing TechFin and Ancillary Services providers operating within GIFT City. For Alternative Investment Funds (AIFs), this new regime is highly significant because many routine functions like fund administration, investor servicing, compliance monitoring, accounting, legal support, risk management, and technology are now regulated under these rules.
Why this matters for AIFs:
AIFs must deal only with service providers holding valid registration under the new framework.
Providers must appoint principal and compliance officers based in the IFSC and follow strict fit-and-proper requirements.
The permitted services have been clearly defined in detailed schedules, while certain activities are explicitly prohibited, tightening outsourcing structures.
The IFSCA will have the power to inspect providers and enforce compliance, ensuring higher governance standards.
Transactions with such providers must be in specified foreign currencies, with INR allowed only for limited local expenses.
Implications: AIF managers and trustees should update their operational due diligence to ensure all outsourced or partnered service entities align with these new requirements. Vendor selection, contractual clauses, oversight mechanisms, and periodic checks must be adapted to the new regulatory landscape.
Action points for AIF managers:
Identify all outsourced TechFin and Ancillary activities linked to fund operations.
Confirm whether existing partners have applied or obtained registration within the IFSCA timelines.
Incorporate contractual safeguards to require ongoing compliance.
Review fee structures to align with any cost impact from compliance obligations on vendors.
Connect with AIF Services for practical guidance, vendor due diligence checklists, and periodic updates on evolving IFSCA regulations.