GIFT City Fund Onboarding Hindered by KYC Challenges, IFSCA Seeks Solutions

High costs and operational complexities within the Realize Your Customer (KYC) process are impeding the ability of Fund Management Entities (FMEs) in GIFT City, India’s International Financial Services Centre (IFSC), to onboard overseas investors. This limitation currently restricts many offerings to offshore family offices and institutional investors, according to fund managers.

KYC Hurdles and Costs

A primary challenge lies in the requirement for physical attestation of documents, significantly increasing both the time and expense associated with onboarding individual clients. The current framework places the responsibility of completing KYC directly on the FMEs, adding to their operational burden.

IFSCA Response and Proposed Solutions

The International Financial Services Centres Authority (IFSCA), the regulatory body for GIFT City, has acknowledged the issue and formed a committee to address the challenges raised by FMEs. Representations have been made seeking regulatory relaxations to streamline the process.

Proposed Regulatory Changes

Fund managers are advocating for several changes, including:

• Recognizing prior KYC conducted by regional distributors.
• Expanding the presence of KYC Registration Agencies (KRAs) within the GIFT-IFSC.
• Introducing greater flexibility within the KYC framework.

One senior official at an FME suggested a more pragmatic approach would be to recognize jurisdictions with robust regulatory controls, implementing additional checks only for investors originating from areas with weaker safeguards.

Current KYC Landscape in GIFT City

Currently, GIFT-IFSC has only one KRA. KYC verification requirements vary depending on the investor’s country of origin. For Non-Resident Indians (NRIs) and foreign investors, physical original applications and supporting documents are mandatory, requiring couriering which adds significant costs. Attestation from officials in the respective jurisdictions is also often required, further complicating operations.

Jay Kothari, Lead Investment Strategist and Head of International Business at DSP Mutual Fund, highlighted the challenges, stating that even NRIs based in financial hubs like the UAE, Singapore, or Hong Kong often require to route funds through a registered distributor unless they directly engage with the FMEs via reverse solicitation. He noted a lack of clarity regarding these requirements across all jurisdictions, leading to caution among FMEs.

Platform-Based Onboarding as a Potential Solution

Industry participants point to the success of platform-based investment mechanisms in global markets, where platforms onboard both funds and investors, aggregating trades and streamlining the investment process. A similar system in GIFT City could alleviate the operational complexity of conducting separate KYCs for multiple jurisdictions.

Growth and Current Status of GIFT City FMEs

As of December 2025, GIFT City hosts 202 FMEs with over 313 schemes launched. Fundraising has surpassed $17.34 billion, with total commitments exceeding $32 billion. However, a significant portion of overseas inflows has come from family offices and institutional investors, indicating the limitations imposed by the current KYC process.

Recent IFSCA Initiatives

IFSCA has taken steps to address some of the challenges, including allowing retail schemes from the financial hub and enabling video KYC for NRIs. However, fund managers note that video KYC does not eliminate the need for physical application forms and is not universally applicable to all investment products. The IFSCA is reportedly working to extend the video KYC framework to foreign nationals and has already permitted the acceptance of KYCs completed by KRAs for Indian investors.

Queries sent to IFSCA for comment remained unanswered at the time of publication.