Introduction

The IFSCA Fintech Incentive Scheme is a groundbreaking initiative introduced by the International Financial Services Centres Authority (IFSCA) to propel India's International Financial Services Centre (IFSC) into the league of leading global financial centers. This scheme aims to provide financial assistance and support to various Fintech activities, including Indian and international entities operating in the IFSC. By encouraging innovation and fostering collaboration, the IFSCA Fintech Incentive Scheme aims to create a vibrant ecosystem for the growth of the Fintech sector.

Objectives of the Scheme

The primary objectives of the IFSCA Fintech Incentive Scheme are as follows:

  1. Empower Indian Fintechs targeting foreign markets: The scheme aims to provide financial support to Indian Fintech companies seeking access to overseas markets. By offering grants and incentives, the scheme encourages these companies to expand their operations globally and promote India as a hub for Fintech innovation.
  2. Facilitate listing on IFSCA-recognized stock exchanges: The scheme also extends its support to domestic Fintechs aiming to list on IFSCA-recognized stock exchanges. By providing grants and assistance, the scheme incentivizes these companies to access capital markets and enhance their visibility in the global financial landscape.
  3. Foster international access to Indian IFSC market: International Fintech companies seeking market access to the Indian IFSC can also benefit from the scheme. By aligning with the IFSCA's regulatory framework, these companies can receive financial assistance and support to establish their presence in the Indian market.
  4. Promote innovation through the Inter-Operable Regulatory Sandbox (IORS) framework: Foreign Fintechs looking to enter the Indian market through the IORS framework can leverage the benefits of the scheme. By participating in the sandbox and developing innovative solutions, these companies can receive grants and incentives to fuel their growth and expansion.
  5. Encourage domestic Fintechs to expand to the IFSC: The scheme aims to attract domestic Fintech companies to expand their business operations to the IFSC. By providing authorization, registration, and regulatory sandbox support, the scheme enables these companies to explore new opportunities and leverage the benefits of operating in the IFSC.

Applicability of the IFSCA Fintech Incentive Scheme

The IFSCA Fintech Incentive Scheme is applicable to various categories of entities and individuals operating in the Fintech sector. The scheme covers the following:

Indian FinTechs targeting foreign markets

Indian Fintech companies that are seeking access to foreign markets can avail themselves of the benefits offered by the scheme. These companies can receive financial support and grants to facilitate their expansion into international markets and promote the export of Indian Fintech solutions.

Domestic FinTechs aiming to list on IFSCA-recognized exchanges

Domestic Fintech companies that aspire to list on IFSCA-recognized stock exchanges can leverage the incentives provided by the scheme. By meeting the eligibility criteria and fulfilling the requirements, these companies can receive grants and support to enhance their chances of successful listing.

International FinTechs targeting Indian IFSC market access

International Fintech companies that are interested in accessing the Indian IFSC market can benefit from the scheme. By complying with the regulatory framework of the IFSCA and establishing their presence in the Indian market, these companies can receive financial assistance and support to facilitate their operations.

Foreign FinTechs eyeing Indian markets through the Inter-Operable Regulatory Sandbox (IORS) framework

Foreign Fintech companies that aim to enter the Indian market through the IORS framework can avail themselves of the incentives provided by the scheme. By participating in the regulatory sandbox and developing innovative solutions, these companies can receive grants and support to navigate the Indian market and establish their foothold.

Domestic FinTechs expanding their business to the IFSC

Domestic Fintech companies that intend to expand their business operations to the IFSC can benefit from the scheme. Whether through authorization, registration, or participation in the regulatory sandbox, these companies can receive financial assistance and support to facilitate their expansion into the IFSC.

Key Definitions under the IFSCA Fintech Incentive Scheme

To ensure clarity and understanding, the IFSCA Fintech Incentive Scheme provides key definitions of terms used within the scheme. Some important definitions include:

  • FinTech: The term "FinTech" refers to technology-driven solutions that assist financial institutions in providing financial services. These solutions can include but are not limited to payment systems, lending platforms, robo-advisors, and blockchain-based applications.
  • Regulatory Sandbox: The regulatory sandbox is an environment that allows limited real customer interactions for testing innovative FinTech solutions. It provides a controlled space for FinTech companies to experiment with new ideas and technologies under the supervision of the IFSCA.
  • Indian FinTech: An Indian FinTech refers to a company that is registered in India and primarily operates in the Fintech sector. These companies can include startups, established businesses, and entities regulated by authorities such as the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI).
  • International FinTech: An international FinTech refers to a company that is incorporated outside of India and operates in the Fintech sector. These companies may have a non-resident majority shareholding and comply with the regulations of their home country.

By providing clear definitions, the IFSCA Fintech Incentive Scheme ensures that the criteria for eligibility and the scope of the scheme are well-defined and transparent.

Eligibility to Claim Grant under the IFSCA Fintech Incentive Scheme

The eligibility criteria to claim grants under the IFSCA Fintech Incentive Scheme vary based on the category of the applicant. The scheme recognizes both Indian and foreign entities and individuals, each with specific requirements.

Eligible entities and individuals

Indian entities and individuals that can claim grants under the scheme include:

  • DPIIT-registered startups: Startups that are recognized and registered with the Department for Promotion of Industry and Internal Trade (DPIIT) in India.
  • Companies under the Companies Act 2013: Companies that are incorporated in India and operate under the regulatory framework of the Companies Act 2013.
  • Resident individuals: Indian citizens or residents who fulfill the criteria specified by the scheme.
  • Entities under the purview of regulators: Entities regulated by authorities such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), or other recognized regulatory bodies.

Foreign entities and individuals that can claim grants under the scheme include:

  • Individuals or entities from FATF compliant nations: Entities incorporated or individuals residing in countries that are compliant with the Financial Action Task Force (FATF) guidelines. These entities should have a majority non-resident shareholding, i.e., over 51% ownership by non-residents.

Criteria for Indian and foreign applicants

Indian and foreign applicants must fulfill the following criteria to be eligible for grants under the IFSCA Fintech Incentive Scheme:

  • Compliance with legal and regulatory requirements: Applicants must comply with all relevant laws, regulations, and guidelines applicable to their operations in the Fintech sector. This includes adherence to anti-money laundering (AML) and counter-terrorism financing (CTF) measures.
  • Financial soundness and viability: Applicants must demonstrate financial soundness and viability to ensure that the grants provided under the scheme are utilized effectively for the growth and development of their Fintech business.
  • Commitment to innovation and technology adoption: Applicants should display a commitment to innovation and the adoption of cutting-edge technologies in their Fintech solutions. This includes leveraging emerging technologies such as artificial intelligence (AI), blockchain, and data analytics.
  • Compliance with ethical standards: Applicants must adhere to high ethical standards and demonstrate responsible conduct in their Fintech operations. This includes safeguarding customer data and privacy, ensuring fair and transparent practices, and promoting financial inclusion.

By establishing clear eligibility criteria, the scheme ensures that grants are provided to deserving entities and individuals, promoting innovation, and contributing to the growth of the Fintech sector.

Types of Grants under the IFSCA Fintech Incentive Scheme

The IFSCA Fintech Incentive Scheme offers various types of grants to eligible entities and individuals. These grants provide financial support and incentives for different stages and aspects of Fintech operations. The grants available under the scheme include:

FinTech Start-up Grant

The FinTech Start-up Grant is designed to support early-stage Fintech startups with innovative solutions. Startups that fulfill the eligibility criteria can receive grants of up to Rs. 15 lakhs. This grant aims to provide a boost to startups by facilitating the development and deployment of their Fintech solutions.

Proof of Concept (PoC) Grant

The Proof of Concept (PoC) Grant is available for both early-stage and mature Fintech entities. This grant provides funding of up to Rs. 50 lakhs to support the conduct of proof-of-concept projects. By receiving this grant, Fintech companies can validate the viability and potential of their solutions before full-scale implementation.

Sandbox Grant

The Sandbox Grant supports Fintech entities in developing innovative products or services within a regulatory sandbox environment. Fintech companies can receive grants of up to Rs. 30 lakhs to cover the expenses related to sandbox testing and validation. This grant encourages experimentation and enables Fintech companies to refine their solutions within a controlled environment.

Green FinTech Grant

The Green FinTech Grant aims to promote sustainable finance solutions within the Fintech sector. Fintech entities working on environmentally friendly and sustainable finance solutions can receive grants of up to Rs. 75 lakhs. This grant encourages the development and adoption of green technologies and solutions in the Fintech industry.

Accelerator Grant

The Accelerator Grant supports accelerators operating within the IFSC. Accelerators play a crucial role in nurturing and mentoring Fintech startups. Under this grant, accelerators can receive financial assistance of up to Rs. 10 lakhs to support their operations and provide valuable guidance to Fintech startups.

Listing Support Grant

The Listing Support Grant is specifically designed to assist domestic Fintech entities in listing on recognized stock exchanges within the IFSC. Fintech companies aiming to list on these exchanges can receive grants of up to Rs. 15 lakhs to cover the expenses associated with the listing process. This grant promotes the visibility and growth of Fintech companies in the IFSC.

By offering these grants, the IFSCA Fintech Incentive Scheme aims to provide financial support and incentives at different stages of the Fintech business lifecycle. These grants facilitate the development, testing, and growth of innovative Fintech solutions, fostering a dynamic and thriving ecosystem within the IFSC.

Code of Conduct for Key Managerial Persons under the IFSCA Fintech Incentive Scheme

The IFSCA Fintech Incentive Scheme imposes certain responsibilities and obligations on Key Managerial Persons (KMPs) associated with Fintech entities availing grants under the scheme. KMPs play a crucial role in the management and operation of Fintech companies. The scheme outlines the following code of conduct for KMPs:

  • Ethical conduct: KMPs must adhere to high ethical standards and conduct themselves with integrity, honesty, and transparency. They should avoid conflicts of interest and ensure fair and responsible behavior in all business dealings.
  • Compliance with regulations: KMPs should have a thorough understanding of the regulatory framework governing Fintech operations. They must ensure compliance with all applicable laws, regulations, and guidelines to maintain the integrity of the Fintech sector.
  • Protection of customer interests: KMPs have a responsibility to protect the interests of customers and ensure the fair treatment of customers. They should prioritize customer satisfaction, data privacy, and security in all aspects of their Fintech operations.
  • Risk management and governance: KMPs should establish robust risk management systems and governance structures within their Fintech entities. They must identify and mitigate risks associated with the Fintech business and ensure effective governance and oversight.
  • Continual professional development: KMPs should actively engage in professional development and stay updated with the latest developments in the Fintech industry. This includes attending relevant training programs, conferences, and seminars to enhance their knowledge and skills.

By establishing a code of conduct for KMPs, the IFSCA Fintech Incentive Scheme aims to ensure responsible and ethical leadership within Fintech entities. This fosters trust, credibility, and stability in the Fintech sector, promoting the growth and sustainability of the industry.

Procedure to Apply for the IFSCA Fintech Incentive Scheme

The application process for the IFSCA Fintech Incentive Scheme is designed to be straightforward and transparent. Fintech entities interested in availing the benefits of the scheme can follow a step-by-step procedure outlined below:

  1. Review eligibility criteria: Before initiating the application process, Fintech entities should carefully review the eligibility criteria specified by the scheme. This includes understanding the category of the applicant, compliance requirements, and other conditions for grant eligibility.
  2. Prepare application documents: Fintech entities should gather all the necessary documents and information required for the application process. This may include entity details, proof of compliance with regulations, financial statements, and any other supporting documents specified by the scheme.
  3. Complete the application form: Fintech entities should complete the application form provided by the IFSCA for the Fintech Incentive Scheme. This form captures essential information about the entity, its operations, and the specific grant being applied for.
  4. Submit the application: Once the application form and supporting documents are prepared, Fintech entities can submit their application to the designated authority responsible for processing the applications under the scheme. The submission process can be either online or offline, as specified by the scheme.
  5. Application review and evaluation: The submitted application will undergo a thorough review and evaluation process by the authorities. This may include assessing the eligibility of the applicant, evaluating the viability of the proposed Fintech solution, and verifying compliance with regulatory requirements.
  6. Grant disbursement and utilization: If the application is approved, the Fintech entity will receive the grant amount as specified by the scheme. The entity should utilize the grant in accordance with the terms and conditions outlined in the scheme, ensuring that it contributes to the growth and development of the Fintech business.

By following this procedure, Fintech entities can apply for the IFSCA Fintech Incentive Scheme and avail the benefits and support provided by the scheme. It is important to ensure that all application requirements are met and that the application is submitted within the designated timelines to maximize the chances of success.

Reimbursement of Eligible Expenses under the IFSCA Fintech Incentive Scheme

The IFSCA Fintech Incentive Scheme provides reimbursement of eligible expenses to Fintech entities that have received grants under the scheme. These reimbursements are intended to cover specific expenses incurred by the Fintech entity in the course of their operations. The scheme outlines the following details regarding the reimbursement process:

Overview of eligible expenses

The scheme specifies the categories of expenses that are eligible for reimbursement. These expenses may include:

  • Research and development costs: Expenses related to research and development activities that contribute to the development and enhancement of the Fintech solution.
  • Technology infrastructure costs: Expenses incurred for the acquisition, installation, and maintenance of technology infrastructure required for the Fintech operations.
  • Marketing and promotional expenses: Expenses associated with marketing and promotional activities aimed at creating awareness and generating demand for the Fintech solution.
  • Legal and professional fees: Expenses incurred for legal and professional services availed by the Fintech entity, including fees paid to consultants, lawyers, and other professionals.
  • Training and skill development costs: Expenses related to training and skill development programs undertaken by the Fintech entity to enhance the capabilities of its workforce.

Process for reimbursement

To claim reimbursement of eligible expenses, the Fintech entity should follow the process specified by the scheme. This typically involves the following steps:

  1. Documenting eligible expenses: The Fintech entity should maintain proper documentation of the eligible expenses incurred, including invoices, receipts, and other supporting documents.
  2. Submission of reimbursement request: The Fintech entity should submit a reimbursement request to the designated authority responsible for processing such requests. The request should include all necessary documents and information required for the reimbursement process.
  3. Verification and evaluation: The authority will verify and evaluate the reimbursement request, ensuring that the expenses claimed are eligible as per the scheme guidelines. This may involve conducting audits, site visits, or seeking additional information from the Fintech entity.
  4. Approval and disbursement: Once the reimbursement request is approved, the authority will disburse the reimbursement amount as per the agreed terms and conditions. The Fintech entity should ensure that the reimbursement amount is utilized for the intended purposes and in accordance with the scheme guidelines.

By facilitating the reimbursement of eligible expenses, the IFSCA Fintech Incentive Scheme aims to support Fintech entities in managing their operational costs and investing in critical areas such as research, development, and technology infrastructure.

Achievement of Milestones and Document Submission

As part of the IFSCA Fintech Incentive Scheme, Fintech entities are required to achieve specific milestones and submit relevant documents to demonstrate their progress and compliance with the scheme guidelines. This ensures transparency and accountability in the utilization of grants and supports the monitoring and evaluation process. The key aspects related to the achievement of milestones and document submission include:

Milestone-based approach for grant disbursement

The scheme follows a milestone-based approach for grant disbursement, wherein the Fintech entity receives the grant amount in stages based on the achievement of predetermined milestones. These milestones are set to track the progress and development of the Fintech solution, ensuring that the grant is utilized effectively.

Key documents required for submission

To support the achievement of milestones, the Fintech entity is required to submit relevant documents at each stage. These documents may include:

  • Progress reports: Reports detailing the progress made by the Fintech entity in achieving the milestones. These reports should provide a clear overview of the development, testing, and implementation of the Fintech solution.
  • Financial statements: Statements that provide a comprehensive view of the financial performance and stability of the Fintech entity. These statements should be prepared in accordance with the applicable accounting standards and regulations.
  • Audit reports: Reports prepared by independent auditors, certifying the accuracy and completeness of the financial statements and providing assurance on the financial health of the Fintech entity.
  • Compliance certificates: Certificates issued by the Fintech entity, confirming compliance with the regulatory requirements and guidelines applicable to its operations.

By submitting these documents, the Fintech entity demonstrates its progress, compliance, and responsible utilization of the grant provided under the scheme. This ensures transparency, accountability, and effective monitoring of the Fintech operations.

Regulatory Requirements for FinTech Entities under the IFSCA Fintech Incentive Scheme

Fintech entities availing the benefits of the IFSCA Fintech Incentive Scheme are subject to certain regulatory requirements and obligations. Compliance with these requirements ensures the integrity of the Fintech operations and fosters trust among stakeholders. The key regulatory requirements for FinTech entities under the scheme include:

  • Compliance with applicable laws and regulations: Fintech entities must comply with all relevant laws, regulations, and guidelines applicable to their operations. This includes complying with anti-money laundering (AML) and counter-terrorism financing (CTF) measures, data protection laws, and consumer protection regulations.
  • Reporting obligations: Fintech entities should fulfill their reporting obligations as specified by the regulatory authorities. This may include submitting periodic reports, disclosures, and other relevant information to the IFSCA or other regulatory bodies.
  • Risk management and internal controls: Fintech entities should establish robust risk management systems and internal controls to identify, assess, and mitigate risks associated with their operations. This includes implementing appropriate measures to safeguard customer data, prevent fraud, and ensure operational resilience.
  • Customer protection: Fintech entities should prioritize the protection of customer interests and ensure fair and transparent practices. This includes providing clear and accurate information to customers, ensuring the security of customer data, and addressing customer grievances promptly and effectively.
  • Compliance monitoring and audits: Fintech entities may be subject to compliance monitoring and audits by the IFSCA or other regulatory authorities. The purpose of these monitoring activities is to assess the compliance of the Fintech entity with the regulatory requirements and guidelines.

By adhering to these regulatory requirements, Fintech entities can maintain the integrity of their operations, build trust among customers and stakeholders, and contribute to the overall stability and development of the Fintech sector.

Power of IFSCA to Relax Strict Enforcement

The IFSCA has the power to relax strict enforcement of certain provisions under the IFSCA Fintech Incentive Scheme. This discretionary power allows the IFSCA to consider individual circumstances and provide flexibility in the implementation of the scheme. The relaxation of strict enforcement may be granted in the following situations:

  • Emerging Fintech innovations: The IFSCA may relax strict enforcement in cases where emerging Fintech innovations demonstrate potential benefits to the financial services industry. This provides room for experimentation and promotes the adoption of new technologies and solutions.
  • Unforeseen challenges: The IFSCA may relax enforcement when Fintech entities face unforeseen challenges that hinder their compliance with certain provisions of the scheme. This allows the IFSCA to consider the unique circumstances of each Fintech entity and provide appropriate support and guidance.
  • Pilot projects and research initiatives: The IFSCA may relax enforcement for pilot projects and research initiatives that aim to explore new areas of Fintech innovation. This flexibility encourages experimentation and fosters a culture of innovation within the Fintech sector.

By exercising its discretionary power to relax strict enforcement, the IFSCA demonstrates its commitment to supporting Fintech entities and promoting a conducive environment for innovation, growth, and development.

Additional Conditions for Grant under the IFSCA Fintech Incentive Scheme

In addition to the general conditions and obligations outlined in the scheme, there may be specific additional conditions that Fintech entities must fulfill to avail grants under the IFSCA Fintech Incentive Scheme. These additional conditions may include:

  • Specific project requirements: Fintech entities may be required to fulfill specific project requirements, such as the development of solutions addressing specific challenges or aligning with strategic national initiatives.
  • Collaboration and partnerships: Fintech entities may be encouraged to collaborate with other entities, research institutions, or academia to foster innovation and knowledge sharing.
  • Performance evaluation: Fintech entities may undergo periodic performance evaluations to assess the impact and effectiveness of their Fintech solutions. These evaluations may be conducted by the IFSCA or other designated authorities.

The fulfillment of these additional conditions ensures that the grants provided under the scheme are utilized for purposes that align with the broader objectives of the IFSCA and contribute to the growth and development of the Fintech sector.

Conclusion

The IFSCA Fintech Incentive Scheme is a transformative initiative aimed at empowering innovation, fostering collaboration, and promoting the growth of the Fintech sector. By providing financial assistance, grants, and incentives, the scheme encourages Indian and international Fintech entities to explore new markets, expand their operations, and develop cutting-edge solutions. With a focus on transparency, accountability, and responsible conduct, the scheme ensures that grants are utilized effectively and contribute to the overall development of the Fintech ecosystem.

Through the IFSCA Fintech Incentive Scheme, the IFSCA establishes itself as a proactive regulator and a catalyst for innovation in the financial services industry. This scheme not only supports the growth of individual Fintech entities but also strengthens the overall competitiveness and attractiveness of the Indian IFSC. By promoting collaboration, knowledge sharing, and ethical conduct, the scheme lays the foundation for a vibrant and sustainable Fintech ecosystem within the IFSC.

As the Fintech sector continues to evolve and shape the future of finance, the IFSCA Fintech Incentive Scheme serves as a powerful enabler, empowering Fintech entities to drive innovation, create value, and contribute to the digital transformation of the financial services industry. With the right support and incentives in place, Fintech startups and established players alike can thrive in the IFSC and position India as a global hub for Fintech excellence.