Payment Service Providers (PSPs) play a crucial role in facilitating electronic payment transactions among different entities, including customers, businesses, and banks. These companies empower businesses to accept diverse payment methods, such as credit cards, debit cards, digital wallets, and bank transfers, through a unified platform or seamless integration. By offering essential infrastructure, robust security measures, and adherence to regulatory requirements, PSPs ensure that businesses can process payments in a secure and streamlined manner. In essence, payment service providers collaborate with acquiring banks (payment processors) to oversee the entire transaction process from initiation to completion.

GIFT City (Gujarat International Finance Tech) is strategically positioned to emerge as a leading worldwide financial and IT services hub, mirroring globally benchmarked financial centers. The establishment of the International Financial Services Centre (IFSC) was a pivotal move to manage financial service transactions conducted outside India by foreign and Indian financial institutions through overseas branches and subsidiaries.

The Special Economic Zones Act of 2005 laid the foundation for the IFSC, providing a framework for its establishment. Essentially, the IFSC facilitates financial service companies in offering foreign currency financial services and products to consumers. Under Indian exchange control regulations, entities within the IFSC, including 'units,' are considered residents outside India. This unique positioning makes the IFSC an attractive jurisdiction for effectively pooling and managing global financial resources.

For establishing Payment Service Provider (PSPs) entity in IFCA, government has come up with new regulation named International Financial Services Centres Authority (Payment Services) Regulations, 2024 as per which “payment service provider” means a company authorised by the Authority, under these Regulations, to provide one or more of the Payment Services.

Any person desirous of providing Payment Services in or from IFSC (hereinafter referred to as “the Applicant”) shall submit an application to the Authority, for grant of authorisation as a Payment Service Provider, in the format and in the manner as may be specified by the Authority.

The Authority may, on being satisfied that the Applicant has complied with the conditions laid down in these Regulations and is eligible to act as a Payment Service Provider, grant a Certificate of Authorisation to the Applicant subject to such conditions as the Authority may deem fit.

Duties of Payment Service Provider

  1. Duty to protect Applicable Funds: Responsibility to safeguard funds as per Regulations and industry standards.
  2. Duty to comply with AML, CTF & KYC Guidelines: Obligation to adhere to the Anti Money Laundering, Counter-Terrorist Financing, and Know Your Customer guidelines issued by the International Financial Services Centres Authority.
  3. Duty to comply with laws: Commitment to follow all applicable laws and regulations governing payment services.
  4. Duty of co-operation with the Authority: Requirement to collaborate and cooperate with the regulatory Authority in all relevant matters.
  5. Duty towards Payment Service Users: Obligation to ensure fair and transparent dealings, protecting the interests of Payment Service Users.
  6. Duty to secure information technology systems and other infrastructure: Responsibility to maintain the security of information technology systems and other essential infrastructure to prevent unauthorized access and breaches.
  7. Redressal of grievances and dispute resolution: Provision for addressing and resolving grievances and disputes in accordance with established procedures.
  8. Action in case of default: Requirement to take appropriate actions in the event of any default, ensuring compliance with Regulations and addressing issues promptly.


  1. Net worth
    1. For Regular Payment Service Providers, it is mandatory to maintain a minimum net worth of USD 100,000 (or its equivalent in a Specified Foreign Currency) at the commencement of operations. Additionally, they are required to achieve a minimum net worth of USD 200,000 (or equivalent in a Specified Foreign Currency) by the conclusion of the third financial year, i.e., by March 31, from the year of initiating operations.
    2. Significant Payment Service Providers must attain a minimum net worth of USD 250,000 (or its equivalent in a Specified Foreign Currency) within ninety days of being designated as such by the Authority. Furthermore, these providers are obliged to reach a minimum net worth of USD 500,000 (or equivalent in a Specified Foreign Currency) by the end of the third financial year, i.e., by March 31, from the year of receiving the designation as a Significant Payment Service Provider.
    3. The calculation of net worth includes paid-up equity capital, compulsorily convertible preference shares, free reserves, the balance in the share premium account, and capital reserves derived from surplus arising from the sale proceeds of assets. However, it does not encompass reserves created by the revaluation of assets. The net worth is adjusted for accumulated loss balance, the book value of intangible assets, and deferred revenue expenditure, if any. Compulsorily convertible preference shares may be non-cumulative or cumulative but must be compulsorily convertible into equity shares. Shareholder agreements must explicitly prohibit the withdrawal of this preference capital at any time.
  1. Fit and Proper Person
    1. The Schedule II of this Regulation outlines fit and proper criteria for Relevant Persons, requiring competence, honesty, integrity, and sound financial standing, as expected by the Authority.
    2. Criteria are not exhaustive and complement legal provisions, to be read with applicable legislation and guidelines issued by the Authority.
    3. Payment Service Providers must establish effective systems to ensure Relevant Persons meet the 'fit and proper' criteria.
    4. 'Fit and proper' evaluations, as specified in the Annex to Schedule II of the Regulation, are mandatory for Relevant Persons at appointment and regularly thereafter.
    5. A Relevant Person is fit and proper if they demonstrate:

- Fairness, integrity, financial integrity, good reputation, character, and honesty.

- Absence of disqualifications, including legal convictions, pending recovery proceedings, winding-up orders, insolvency, regulatory restrictions, and other specified disqualifications by the Authority.

  1. An applicant seeking authorization Significant Payment Service Provider must be incorporated as a company with its registered office located in the International Financial Services Centre (IFSC).
  2. A Payment Service Provider must establish its place of business and registered office within the International Financial Services Centre (IFSC). If the Provider intends to conduct certain payment service activities from a location outside the IFSC, prior approval from the Authority is required.

In Principal Approval

When assessing an application under sub-regulation (1) of regulation 4, the Authority will consider various factors deemed relevant for the authorization, including:

  1. The sufficient experience of relevant persons within the applicant, including any existing authorization to provide similar services in other jurisdictions.
  2. The possession of necessary infrastructure, such as office space, equipment, communication facilities, and manpower, to effectively carry out the proposed activities.
  3. Compliance with the specified net worth requirement outlined in the Regulations.
  4. The financial soundness of the applicant.
  5. Fulfilment of the "fit and proper" requirements by both the applicant and relevant persons.
  6. Any history of refusal of authorization by the Authority for the applicant or its Group Entities and the reasons for such refusals. An authorized person as a Payment Service Provider is permitted to offer one or more Payment Services, as outlined in Part A of Schedule I to these Regulations.
  7. Whether the applicant or relevant persons are currently under any legal proceedings initiated by the Authority for breach of law.
  8. Assurance that the interests of Payment Services Users, including the terms and conditions governing their relationship with a Payment Service Provider, will be adequately protected if authorization is granted.
  9. The Authority commits to processing every application for authorization promptly, with an effort to dispose of such applications within six months from the date of filing.
  10. The Authority, if deemed necessary, may require a Payment Service Provider to maintain a security deposit, specifying the amount and form.
  11. A Payment Service Provider must designate an IFSC Banking Unit or IFSC Banking Company as its Nodal Bank and communicate this, along with the bank's concurrence, to the Authority, in line with the requirement under sub-regulation (1) of regulation 10.
  12. Post the authorization under sub-regulation (1), a Payment Service Provider must promptly inform the Authority of any significant changes in the previously provided information or particulars.
  13. The Authority reserves the right to modify one or more conditions for initiating or continuing Payment Services under these Regulations.’
  14. If the application refused by the department then applicant can fresh apply for the authorization after six months after the date of communication of refusal of application.

Commencement of Business

The Payment Service Provider is required to initiate its operations within six months from the issuance of the Certificate of Authorization. If there is a need for an extension beyond this period, the Provider can apply for an extension, provided it is instructed by a board resolution at least two months before the latest commencement date. The application should include detailed reasons for the extension, the duration sought, steps to overcome the delay, and any relevant information. The Authority, upon satisfaction that the Provider cannot commence operations within the stipulated time, may grant an extension, not exceeding three months, but only once.

Validity of Authorization

The Certificate of Authorization issued valid unless revoked by the Authority or voluntarily surrendered by the Payment Service Provider.

Persons exempted from Authorisation

The following individuals / entities are exempt from the requirement of obtaining authorization under the Regulations. They do not need to go through the process of seeking grant of authorisation as a Payment Service Provide by submitting an application to the IFSCA:

  1. IFSC Banking Company (IBC) or an IFSC Banking Unit (IBU): These entities, if licensed or permitted under the Banking Regulation Act, 1949, and operating within an IFSC are exempt from authorization under these Regulations.
  2. Person licensed to issue credit cards in IFSC: Individuals or entities licensed to issue credit cards specifically within an IFSC are also exempted from the requirement of seeking authorization.
  3. Any other person or class of persons specified by the Authority: Flexibility is provided for the IFSCA to specify additional individuals or classes of individuals who may be exempted within the scope of these Regulations.

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