“Entities that remain inactive have been asked about their plans and, where there is no clear intent to operate, they may be persuaded to voluntarily surrender the license,” said an official, one of the three people quoted earlier, on the condition of anonymity. All three people quoted didn’t want to be identified.
In three cases, dormant ventures in the capital markets segment were asked to surrender their licenses because of the same reason, the official said.
The International Financial Services Centers Authority (IFSCA) seeks to develop Gift City more like Singapore, which requires an active presence of companies, rather than the Cayman Islands and Mauritius, which do not have a strict requirement of having people and an office.
“With more entities getting registered, the authority wants to ensure this doesn’t get diluted and that registrations don’t become just paper setups,” said Rohit Jain, managing partner at Singhania and Co.
Of the 1,034 entities registered with the GIFT International Financial Services Center (GIFT IFSC), 674 are in the capital markets sector as of September 2025, according to the regulator’s quarterly bulletin. Capital market entities include fund management entities, funds, brokers, clearing members, and others. The others cover fintechs, banks, aircraft and ship leasing ventures, among others.
Entities are expected to begin business within a year, a practice that is not unique to IFSC, as other regulators also follow up with licenses that remain dormant, said Shikhar Kacker, partner at Khaitan & Co. In the past, regulators have engaged with entities that made initial investments but later became inactive, and IFSC is now seeking to ensure that only operational entities retain licenses while inactive ones are asked to surrender them, Kacker said.
Queries emailed to the IFSCA did not elicit a response until press time.
Not going the Mauritius way
The substance requirements in the Cayman Islands and Mauritius are much more lenient than those in GIFT City and Singapore.
The Cayman Islands does not require the investment manager to be based there and has minimal economic substance obligations, said Paridhi Agnihotri, chief manager-product at Dovetail, a fund administrator in GIFT City.
“The funds are mandatorily required to have an investment manager based out of Mauritius and demonstrate that the management decisions are being undertaken within the jurisdiction. Thus, there is a need to build in staff and infrastructure on the ground to handle compliance, reporting and investor communication,” said Agnihotri.
However, in Marititus, the funds rely on the services provided by the fund administrators, which act as registered offices for thousands of funds operating from the same address and also provide an investment manager for a particular fund, say experts.
Singapore requires the fund manager to be based locally and mandates a minimum annual expense threshold to prove genuine operations. In India, regulations are stringent, requiring an entity to have two people in the GIFT IFSC and a registered office.
From a regulatory perspective, inactive license-holders still remain on the regulator’s books, creating an extra monitoring burden, especially when space in GIFT City is limited, said Vinod Joseph, partner at ELP. Since only regulated entities can occupy space, Joseph said regulators naturally question entities that secure licenses and space but fail to commence operations or put staff on the ground.
Some leeway for genuine reasons
The GIFT City regulator does offer some leeway for non-operational entities where delays in starting business are due to genuine factors beyond their control. These include dependence on international regulatory approvals, geopolitical uncertainty affecting fund launches, or the last-minute withdrawal of investors.
Jain said that firms often keep overheads low until business gains traction, as setting up a full-fledged office comes with significant costs. “Once operations pick up, there is little reason to continue as a paper entity, though a small number of players could still try to exploit the system by registering in GIFT City to avail benefits while operating from other cities.”
Those who surrender licenses will have to reapply and register again.
The IFSCA combines regulatory diligence with a strong ease-of-doing-business mandate, making licensing in GIFT City relatively efficient, said Ketaki Mehta, partner-GIFT City, Cyril Amarchand Mangaldas. “Any reapplication after license surrender (while unprecedented in the short time span since IFSCA was established) would be assessed case by case, based on full disclosure, which is anyway a requirement as part of the licensing application at IFSC, GIFT City.”
