The International Financial Services Centres Authority (IFSCA) has released a detailed Consultation Paper proposing a significant overhaul in the process and criteria for appointing Public Interest Directors (PIDs) to the Governing Boards of Market Infrastructure Institutions (MIIs) in International Financial Services Centres (IFSC). These reforms are a proactive step toward ensuring robust corporate governance, accountability, and regulatory integrity in an increasingly complex and globalized financial ecosystem.
Why PIDs Matter in IFSC
MIIs—comprising stock exchanges, clearing corporations, and depositories—form the backbone of financial markets. They not only facilitate trading and settlement activities but also perform a quasi-regulatory function. This dual responsibility makes it essential for MIIs to strike a fine balance between profit-making and public interest. That’s where Public Interest Directors come in.
PIDs, by design, are independent professionals tasked with safeguarding the interests of investors and upholding market integrity. Given the cross-border nature of IFSC operations and the high stakes involved, the effectiveness of PIDs hinges significantly on their expertise, independence, and accountability.
What’s Being Proposed?
The consultation paper lays out a comprehensive framework for the appointment, evaluation, and ongoing training of PIDs.
Key highlights include:
Skill-Set Specification: The Mahalingam Committee, whose recommendations anchor the proposed reforms, emphasizes that PIDs should bring in a diverse set of competencies. These include expertise in capital markets, finance and accounts, legal and regulatory matters, and technology. At least one PID on every MII Board must possess deep experience in each of these four core areas.
Structured Appointment Process: The new process introduces a multi-tiered mechanism involving the Nomination and Remuneration Committee (NRC), the MII’s Governing Board, and the final approval by IFSCA. Each stage incorporates stringent checks to ensure candidates are evaluated on merit, domain expertise, and alignment with regulatory needs.
Skill-Based Evaluation Metrics: A structured evaluation system has been proposed with weightage given to personal integrity, professional qualifications, domain expertise, role synergy, and board-level alignment. This approach mirrors best practices from global market infrastructure institutions like NASDAQ and the London Stock Exchange.
Performance Review and Reappointment: PIDs will now be subject to formal performance reviews before reappointment. MIIs must consider their past contributions, attendance, and continued relevance of skills to evolving market needs.
Mandatory Knowledge Upgradation: Recognizing the fast-paced evolution of financial markets, the IFSCA proposes mandatory annual training for PIDs in areas such as technology, regulation, and market infrastructure, in collaboration with reputed institutions.
Why This Matters
The proposal reflects a paradigm shift in how regulators are approaching governance in capital markets. It recognizes that effective oversight depends not just on regulatory rules but also on the capabilities and independence of those tasked with enforcement at the operational level.
By aligning with international standards such as those set by IOSCO and the Principles for Financial Market Infrastructures (PFMI), these reforms aim to enhance the global competitiveness of IFSCs, while protecting investor interests and promoting transparent market practices.
Call for Public Comments
Stakeholders are encouraged to provide their feedback by August 2, 2025, via email to IFSCA officials. The final guidelines will likely shape the future governance model of Indian MIIs operating in global financial hubs.