Strict KYC Rules and High Costs Dampen Investor Interest in GIFT City

GIFT City, India's financial hub, faces challenges in attracting international investors due to stringent KYC requirements and high operational costs. These hurdles have led fund managers to request regulatory adjustments from the International Financial Services Centres Authority (IFSCA). 

Challenges in KYC Processes 

The KYC process in GIFT City is proving to be a significant barrier for foreign investors. The requirement for physical attestation of documents increases both time and cost, making it difficult for fund management entities (FMEs) to onboard individual clients. Currently, there is only 1 KYC registration agency (KRA) in the GIFT-IFSC, which adds to the complexity. 

For non-resident Indians (NRIs) and foreign investors, the need to courier physical applications and obtain attestation from officials in their respective jurisdictions adds further operational challenges. This requirement is seen as a deterrent for potential investors. 

Regulatory Flexibility Sought 

Fund managers have approached the IFSCA, seeking regulatory relaxations such as recognising prior KYC conducted by regional distributors and expanding the presence of KRAs. They also advocate for a more flexible KYC framework that considers the regulatory strength of the investor's jurisdiction. 

Read More: SEBI Introduced Debit Freeze Facility for Mutual Funds Investors: What You Need to Know! 

Current Investor Base and Fundraising 

As of December 2025, GIFT City hosts 202 FMEs with over 313 schemes launched. While fundraises have surpassed $17.34 billion, total commitments have exceeded $32 billion. However, most overseas inflows have come from family offices and institutional investors, with limited participation from retail investors. 

Video KYC and Future Developments 

IFSCA has allowed video KYC for NRIs, but this does not eliminate the need for physical application forms. The regulator is working to extend the video KYC framework to foreign nationals, aiming to simplify the process. Additionally, KYCs completed by KRAs for Indians are now accepted, which could ease the onboarding process. 

Conclusion 

GIFT City faces significant challenges in attracting international investors due to strict KYC requirements and high costs. Fund managers are advocating for regulatory changes to streamline the onboarding process and make the financial hub more accessible to a broader range of investors. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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