FinTechFuture of Fintech: Analysis of IFSC Authority Scheme, 2022

February 18, 20220


With the growing dependence on technology in all sectors in India, a revolutionary change has been brought in the mindset of individuals whereby the doors for innovation have been opened. The financial sector is one amongst many other sectors which has highly benefitted by its merger with technology and has witnessed the rise of FinTech entities that provide solutions with the use of technology.

An International Financial Services Centre Authority (“IFSCA”) was established by the Government of India as an authority to regulate and develop the financial services market in the International Financial Services Centres (hereinafter referred to as “IFSC”), along with matters incidental to the same.

As per Section 12 of the International Financial Services Centre Authority Act, 2019 (hereinafter referred to as “IFSC Act 2019”), an International Financial Services Authority shall in the International Financial Services Centre, regulate financial services and institutions which were permitted before the commencement of the Act or are permitted by way of notification domestically and internationally. Therefore, exercising its power under this section, the International Financial Services Centres Authority has notified the International Financial Services Centres Authority (FinTech incentive) Scheme, 2022.

.Taking note of the same, the International Financial Services Centres Authority vide Notification No: IFSCA/2021-22/GN/022 dated 02.02.2022 has implemented the International Financial Services Centres Authority (FinTech incentive) Scheme, 2022 (hereinafter referred to as “the Scheme”)  which is effective from 02.02.2022, and shall be effective for the initial period of 3 years from the date of commencement to provide grants to eligible domestic and foreign FinTech entities in developing and providing financial services and competing with international existing providers.


A. The objective of the Scheme:

In line with the growing dependence on FinTech in India, the Scheme has the objective to further establish the global FinTech Hub, which could compete with the existing advanced International Financial Centres (“IFCs”) operations across the jurisdictions.  To exercise/execute this aim, the Scheme shall provide aid to FinTech initiatives and activities in India by the provision of grants under this Scheme based on the fulfillment of eligibility conditions which are devised under the Scheme.

B. Principal Beneficiaries

The principal beneficiaries of this Scheme shall be as follows

  • The domestic FinTech entities which intend to get enlisted on IFSCA and allied stock exchanges;
  • The domestic FinTech entities which intend to have overall market access;
  • The domestic FinTech entities which by way of authorization, registration, or through regulatory sandboxes aim to extend their business to IFSCs.
  • The foreign FinTech entities intend to enlist on IFSCA, and require market access to IFSCs in India and regulated by the regulatory framework of the Authority.
  • The foreign FinTech entities who through the Inter-Operable Regulatory Sandbox (IORS) framework seek to gain access to domestic markets.


As per Regulation 3(iii) of the Scheme, the eligibility of the FinTech entity shall be subject to two conditions as mentioned and elucidated below;

1. When the Applicant is a resident of India;

2. When the Applicant is not a resident of India;

1. The Applicant who is a resident of India shall be eligible for the Scheme subject to the satisfaction of the following;

  • A start-up entity relating to FinTech shall be registered with DPIIT (Department for Promotion of Industry and Internal Trade).
  • An entity shall be registered under Companies Act, 2013 or under Limited Liability Partnership Act, 2008 (LLP) or as a Branch of the Company or LLP in IFSC.
  • An entity shall be regulated by the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory Department of India (IRDAI), or PFRDA.

2. The Applicant who is not a resident of India shall be eligible for the Scheme subject to the satisfaction of the following;

  • A Non-resident entity who is originated from FATF compliant countries/jurisdictions;
  • In case, the Fintech entity is a body corporate registered outside India, the shareholding of non-residents in the FinTech entity shall not be less than 51%.

In addition to the above, there are certain additional eligibility criteria as follows;

  • The FinTech entity shall undertake to use the technology in their products and services, business model distribution, model, or methodology to solve the problem being targeted.
  • The Scheme shall not be applicable for the FinTech entities who have already received the grant from the State or Central Government under certain notified schemes for similar projects.
  • The FinTech entities shall provide different projects in case of having multiple projects. Each project shall be treated as a separate project and shall be considered separately for the benefit of the Scheme.


1. The Scheme shall be applicable to the FinTech entities if;

  • The FinTech entities are the part Authorities Regulatory and Innovative Sandbox.
  • The FinTech entities participate in the Authorities supported Accelerators or Cohorts or Special Programs.
  • The FinTech entities are referred by certain entities including the regulatory and supervisory bodies who consist of the Memorandum of Understanding (MOU) or collaboration with the Authority

2. Incentives provided under the Scheme are subject to fulfillment of conditions:

The following incentives are provided to the entities which qualify as eligible applicants for the availment of benefit under the following terms and conditions:

  • Start-up FinTech grants 

The FinTech entities shall convert an idea into MVP with their novel FinTech solution or idea and the benefit under this grant can be utilized to develop a product or service that pertains to ‘go-to-market’ initiatives by a start-up. Grants up to Rs. 15 Lakhs can be received by an eligible FinTech start-up under this Scheme which would help to mitigate the expenses such as product development, IT cost, and manpower cost.

  • Sand-box grants

The FinTech entities shall utilize the funds in the experimentation and development of innovative products or services, for which a grant of Rs. 30 Lakhs can be provided in order to curtail the cost of development of software, manpower costs, tech-related, etc., expenses.

  • Proof of Concept (PoC) grants

An early mature FinTech entity can utilize the grant for conducting the PoC in the domestic and overseas market. The Scheme provides for the grant of Rs. f Rs. 50 lakhs in order to curtail the expenses such as manpower and IT costs amongst many others.

  • Accelerator Grants

FinTech shall utilize the grant to support accelerators at the IFSC level. The Scheme provides for the grant of Rs. 10 Lakhs for capacity building, bringing investors and tie-ups, etc.

  • Green FinTech Grants

FinTech shall utilise the grant to create the solutions for sustainable finance and sustainability-linked finance, such as ESG investments (Environmental, Social, and Governance). Hence, this Scheme provides for the grant of Rs. 75 Lakhs for sustainable financing.

  • Listing Support grants

A domestic FinTech entity, which aspires to get listed on a recognized stock exchange can utilize this grant for the furtherance of the same. This Scheme provides for the grant of Rs. 15 Lakhs to meet the expenses of the road show, listing requirement, and international travel.


The FinTech entity shall apply for the Scheme in the manner and through the forms prescribed which shall contain particulars of documents and fees as may be prescribed by the Authority.

Upon receiving the application, it shall pass through the process of scrutinization by the Authority and comply with mandatory due diligence to determine the genuine eligibility, compliance with the provisions of the regulator (including KYC-AML guideline), corporate governance, and compliance norms as specified by the authority.

The evaluating committee shall thereby on the receipt of the application, provide the required suggestions and recommendations following which, the Authority shall issue a sanction letter explicitly stating the terms and conditions of the grant and agreement which have to be mandatorily be entered into by the FinTech entity as may be specified.

Pre and post-disbursement conditions, compliances, end-use, and achievements shall be monitored by the internal committee under the specified guideline of the Authority.

Further, subject to the compliance of the terms and conditions prescribed in the sanction letter and achievement of the set milestone, disbursement shall take place.


  • It shall be the responsibility of the FinTech entity to ensure that all the regulatory conditions have been complied with and it shall be held responsible for any omission or commission on the part of its representatives which shall be delegated with power and shall be the interacting link between the entity and the Authority.
  • During the sandbox or accelerator period, the fintech entity or its project team shall be operating from the IFSC.
  • An entity shall be incorporated by the fintech entity at IFSC and seek a registration/authorization/license under the aegis of the Act, if possible after successful completion of the sandbox/license program.
  • The grants under this scheme shall not be used by the FinTech entity to undertake a successful solution in any other jurisdiction apart from India for a period of three years. Hence, the grant under this scheme shall not be utilized elsewhere.
  • Upon a failure in compliance with the conditions, it shall be the duty of the fintech entity to return the grant amount to the Authority along with an interest of 8% p.a.


India is experiencing a huge wave of FinTech start-ups and companies in India since the year 2019 which has changed the entire mechanism of digital payments and financial technology. The Scheme introduced by the Government of India would promote the FinTech start-ups and companies by providing aid and an effective mechanism and guidelines to utilize the aid for the smooth functioning of the business.

The introduction of the Scheme is a beneficial initiative by the Government of India in a manner that it would promote the FinTech sector, which will, in turn, make India a global hub of FinTech companies.

In fact, the mechanism for foreign FinTech companies is a clear invitation for the global FinTech companies to invest in India. However, an absence of any regulation/legislature that governs the FinTech laws in India is still a debatable issue that requires to have a certain clarification in near future.

–  Team AMLEGALS, assisted by Ms. Mehar Kaur (Intern) 

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