The International Financial Services Centres Authority (KYC Registration Agency) Regulations, 2025, mark a significant milestone in the regulatory framework governing Know Your Customer (KYC) processes within India’s International Financial Services Centres (IFSCs). These regulations, published in the Official Gazette and effective from the date of publication, are designed to establish a clear, standardized, and robust mechanism for the registration, functioning, and governance of KYC Registration Agencies (KRAs) within the IFSC ecosystem.
Key Definitions and Scope
To understand the significance of these regulations, it’s important to grasp a few essential definitions laid out under Regulation 2:
KYC Registration Agency (KRA): An entity registered under these regulations to facilitate centralized KYC record maintenance and verification.
Client: Any individual or entity engaged in a financial transaction with a Regulated Entity in the IFSC.
Authority: Refers to the IFSCA, the statutory body responsible for regulating financial products, services, and institutions in the IFSC.
Regulated Entity: Any organization licensed or recognized by the IFSCA to operate within IFSCs.
Other terms such as “Associate”, “Group Entity”, and “Foreign Jurisdiction” are also defined to ensure clarity and alignment with global best practices, especially around anti-money laundering and countering the financing of terrorism (AML/CFT).
Registration and Structural Requirements
Entities aiming to operate as a KRA must apply to the IFSCA in the prescribed format and pay the necessary fees. The applicant must be a company established within the IFSC, although entities already registered with SEBI (Securities and Exchange Board of India) for similar activities may set up a wholly owned subsidiary or a branch in the IFSC.
A minimum net worth of USD 1 million is mandated, which must be maintained at all times. In the case of branches set up by SEBI-registered entities, this net worth must be ringfenced, reinforcing the need for financial resilience and operational independence.
Fit and Proper Criteria
A cornerstone of the new regulations is the insistence on the “fit and proper” status of the KRA and its key personnel. Directors, principal officers, controlling shareholders, and other senior management must demonstrate integrity, good character, financial prudence, and a clean track record.
The regulations comprehensively outline disqualifying conditions, including:
Convictions involving economic offences or moral turpitude,
Pending recovery or enforcement proceedings,
Insolvency,
Debarment by regulatory authorities, and
Classification as a fugitive economic offender.
This strong emphasis on ethics and integrity is critical for building trust and preventing misuse of KYC information in the global financial ecosystem.
Implications for the Financial Ecosystem
The 2025 KRA Regulations reflect IFSCA’s commitment to strengthening compliance, promoting transparency, and aligning with international standards, including those of IOSCO and FATF. For market participants, these rules ensure a unified and efficient KYC process, critical for onboarding clients in a globally competitive environment.
As IFSCs like GIFT City continue to evolve as hubs for global finance, such robust regulatory frameworks will be instrumental in ensuring sustainable growth, mitigating risks, and attracting high-quality participants from across the world.
In conclusion, the IFSCA (KRA) Regulations, 2025, are not just about compliance—they are a forward-looking step toward transforming India’s IFSCs into trusted and well-regulated financial centers that can stand shoulder-to-shoulder with their global counterparts.
