An IFSC Banking Unit (IBU) is a branch of an Indian or foreign bank, licensed by IFSCA to carry on banking in GIFT IFSC, mainly in 15 specified foreign currencies. The parent bank must provide at least USD 20 million of capital, held at parent level, and obtain a no-objection letter from its home regulator. A bank that wants a separate legal entity can instead set up an IFSC Banking Company (IBC), a subsidiary with at least USD 50 million. The IBC is recognised in the Regulations, but we found no IFSCA licensing procedure, capital method or fee schedule for it.

Two points for depositors and for tax. IBU deposits are not shown to carry deposit insurance: Reg. 18 only allows insurance “subject to applicability”, we found no confirmation of DICGC cover, and certificates of deposit must be sold with a warning that they are “not covered by Deposit Insurance” and that no lender of last resort is available. And whether a GIFT IFSC IBU falls under the Offshore Banking Unit limb or the IFSC-unit limb of s. 147(1) is open, and it decides the deduction period.

“Reg.” means a regulation of the IFSCA (Banking) Regulations, 2020, as consolidated to 14 July 2023 and amended in July 2024. “GEN”, “COB” and “PRU” are the parts of the IFSCA Banking Handbook (v5.0, v6.0 and v5.0, 5 April 2024). Where the Handbook conflicts with the Regulations or later circulars, the latter prevail (see the table near the end). For the wider rulebook map, see the IFSCA regime overview.

Table of Contents

IFSC Banking Unit or IFSC Banking Company

Since 6 July 2023, a Banking Unit may take either form (Reg. 3(1A)):

	IFSC Banking Unit (IBU)	IFSC Banking Company (IBC)
Form	“a branch of the Parent Bank” (Reg. 2(1)(ec))	“a subsidiary company of the Parent Bank” (Reg. 2(1)(eb))
Minimum capital	USD 20 million, “maintained at the Parent Bank” (Reg. 3(3)(a))	USD 50 million, “calculated and … maintained as specified by the Authority” (Reg. 3(3A)(a))
Parent liquidity undertaking	Required (Reg. 3(3)(c))	Not listed (Reg. 3(3A))
Home-regulator directions	Apply unless IFSCA specifies otherwise (Reg. 4(2))	Not extended by Reg. 4(2)
Reserves	CRR exemption except on individuals’ deposits (Reg. 8(1)–(2))	As mandated under the Banking Regulation Act and RBI Act (Reg. 8(3))

An existing IBU may convert to an IBC “with the prior approval of the Authority” (Reg. 3(1A) proviso). The IBC is thinly built out: the Handbook covers branches only, and we found no IFSCA direction on IBC capital calculation, licensing procedure or fees, so the IBC is legally recognised but without a procedure we could locate. The rest of this article therefore describes the IBU.

A Parent Bank may also open a Representative Office or a Global Administrative Office (GAO) (Reg. 3(9)). A GAO supports the parent and group but “shall not book any banking or trading transaction” (COB Module 17, para 7.iii).

Who can apply

Indian Banks and Foreign Banks need an IFSCA licence or permission (Reg. 3(1)), applied for by the Parent Bank (Reg. 3(2)).

Indian Bank: any bank established under any Act, including “a wholly owned subsidiary of a foreign bank incorporated in India”, but not a co-operative bank (Reg. 2(1)(f)).
Foreign Bank: “a banking company incorporated or established outside India” (Reg. 2(1)(d)).
Foreign bank with no Indian presence: meets “additional requirements” (Reg. 3(4)), including showing that “the home supervisor carries out effective global consolidated supervision” (GEN Module 1, para 6).

The old limit of “only one Banking Unit in each International Financial Services Centre” (former Reg. 3(8)) was omitted on 6 July 2023.

Capital

The Parent Bank provides “necessary capital for the IBU, subject to a minimum of USD 20 million”, held at the Parent Bank (Reg. 3(3)(a)). An IBU “is a part of the same legal entity and uses the capital held by the Banking Company” (PRU Module 1, para 1.iii). The base capital applies “from the date of commencement of operations” (GEN Module 1, para 3.i.a). IFSCA may still require an IBU to hold capital resources of its own, in coordination with the home regulator (PRU Module 4, para 2.vi). Both minimums can be changed by IFSCA.

Licensing: IFSCA, SWIT and the home regulator

Home-regulator NOC for an IFSC branch (Reg. 3(3)(b)).
Parent undertakings: to provide liquidity “whenever needed” (Reg. 3(3)(c)); to keep complying with home prudential rules; to share capital, liquidity and leverage reports with IFSCA; and to notify breaches of CRAR, LCR, NSFR or leverage “forthwith” (GEN Module 1, para 3.i.b).
Application on the prescribed form, with the fee (GEN Module 1, para 2.i). IFSCA considers track record, controls, risk management, AML/CFT record and technology (para 5.i).
In-principle approval, possibly with conditions. It “shall not automatically entitle” the applicant to a licence (paras 7.i, 7.iv).
SEZ and SWIT. IFSCA’s indicative workflow runs the IFSCA and SEZ applications jointly on the SWIT portal: SEZ Letter of Approval, in-principle approval “wherever concerned regulation provides for it”, then final approval through SWIT (SWIT workflow v1.0, steps 4, 6, 9).
Licence or refusal. Before refusing, IFSCA gives 30 days for submissions; a rejection follows in writing with reasons within 30 days (Reg. 3(6)–(7)).

The RBI’s role for Indian banks is unclear. The RBI’s 1 April 2015 IBU circular required permission under s. 23(1)(a) of the Banking Regulation Act. Reg. 22(1) says that circular “shall no longer be applicable”. RBI circular RBI/2022-23/145 of 1 December 2022 covers prudential compliance by Indian banks’ IFSC operations, but not the set-up process. We found no current RBI direction on how an Indian bank obtains its NOC, or whether s. 23 permission is still sought. The position is unresolved in the texts read.

Fees for FY 2026-27

Circular IFSCA-DTFA/1/2026 (2 March 2026, corrected 13 March 2026) applies “for FY 2026-27 and onwards”, that is, from 1 April 2026.

Entity	Application	Licence	Recurring (annual)
IFSC Banking Unit	USD 1,000	USD 25,000	By turnover: up to USD 1 bn, 50,000; over 1 bn up to 5 bn, 100,000; over 5 bn up to 10 bn, 150,000; over 10 bn up to 20 bn, 200,000; over 20 bn, 250,000
GAO	USD 1,000	USD 25,000	USD 10,000
Representative Office	USD 1,000	USD 12,500	USD 5,000

IBU turnover is “Based on daily turnover both fund-based and non-fund based” (Schedule I, note 2). In the first year, an advance at the lowest slab is due within 15 days of licence. Each true-up is due by 30 April of the following year (paras 5.2–5.3). Fees are payable in USD to IFSCA’s USD account (para 13.1). An applicant from India that is not already registered with IFSCA has the option to remit only the application fee and the registration (licence) fee in equivalent INR, at the FBIL USD-INR reference rate on the date of remittance (paras 13.2–13.3). That option does not extend to the recurring fee.

Currencies and FEMA status

A Banking Unit does business in the specified foreign currencies. INR business is allowed only “subject to settlement … in the specified foreign currencies” (Reg. 10). There are 15:

USD, EUR, JPY, GBP, CAD, AUD, CHF, HKD, SGD, AED and RUB; and
SEK, NOK, NZD and DKK, added by IFSCA/GN/2024/004 (4 July 2024, in force on Gazette publication, 11 July 2024).

Books are kept in the declared specified currency (Reg. 16). An INR account for expenses is allowed (Reg. 17(1)), as a Special Non-Resident Rupee (SNRR) account with an AD bank (COB Module 2, para 6.a.ii). Nostro accounts are kept separate from the parent’s Indian branches (Reg. 17(2)). Under IFSCA’s 19 June 2026 circular, an IFSC unit that receives proceeds of business outside the IFSC in its SNRR account must remit them to its specified-currency account with an IBU within 30 working days; amounts for administrative expenses are excluded.

Under FEMA, an IFSC financial institution or branch, if permitted or recognised as such by the Government of India or a Regulatory Authority, “shall be treated as a person resident outside India” (Reg. 3, FEM (IFSC) Regulations, 2015). Business with residents is cross-border. See FEMA and GIFT City.

Permitted activities

A Banking Unit may do anything under s. 3(1)(e) of the IFSCA Act and s. 6 of the Banking Regulation Act, “except those which are expressly prohibited either by the Home Regulator of the Parent Bank or by the Authority” (Reg. 13(1)). Referral services are expressly allowed (Reg. 13(2)). COB Module 1 lists deposits, retail and corporate lending, credit enhancement, leasing, factoring, forfaiting, underwriting and portfolio management (para 4). IBUs “may freely borrow from or lend to” other IBUs, the parent and banks outside the IFSC, subject to their internal guidelines (para 4.ii). Insurance is excluded (para 5.i). Where the home regulator bars an activity, the IBU must first obtain home permission (para 4, fn 1).

Dealing with Indian residents, including LRS accounts

With residents, an IBU may (COB Module 2, para 3):

undertake capital account transactions and accept deposits in specified currencies, after checking that RBI rules permit them (paras 3.b, 3.c);
borrow, subject to FEMA (para 3.d); and
undertake current account transactions under the Central Government’s rules (para 3.g).

Resident individuals. Reg. 11(2) lets resident individuals hold specified-currency accounts with a Banking Unit for LRS-permitted transactions. The RBI side is A.P. (DIR Series) Circular No. 15 of 10 July 2024, now para 11 of the LRS Master Direction. It allows LRS remittances to IFSCs for IFSC financial products and services, and for transactions elsewhere “through an FCA held in IFSCs”. The LRS limit is USD 250,000 per financial year (para 1). For the wider picture, see capital flows into GIFT City.

IFSCA’s directions of 13 December 2024 (amended 23 June 2025) require IBUs to:

route onshore LRS remittances through an Authorised Person (para 2.iii);
repatriate received, realised, unspent or unused foreign exchange that is not reinvested within 180 days (para 2.vi); the rule concerns that money, not a continuing investment;
offer fixed deposits to these individuals only for “less than 180 days” (para 3.i);
obtain declarations against settling domestic transactions (para 2.vii) and on the LRS purpose of spending or remitting funds (paras 3(ii), 4(ii));
notify IFSCA by a letter signed by the Branch Head (para 5.i).

IBUs are also “advised to take steps to ensure” that opening of accounts by resident individuals and remittances to them can be enabled digitally on the parent bank’s platforms (para 6).

Other residents. IFSCA clarified on 13 August 2025 that a “foreign currency account with a bank outside India”, in the RBI’s rules on residents’ foreign currency accounts, includes an IBU account. IBUs may open these “without prior permission of the Authority”. That is permission to open the account. It does not itself permit any particular transaction, which must be allowed under the RBI and FEMA rules.

Deposits, certificates of deposit and deposit insurance

Accounts: current, savings and term deposits for individuals; current and term deposits for others (Reg. 12(2)). “Cash transactions in foreign currency accounts shall not be permitted” (Reg. 12(1)).
Current account interest: IBUs “are free to determine the interest rate” (circular, 14 June 2024).
Premature withdrawal: required on term deposits of individuals other than professional clients (COB Module 11, para 4.viii).
RDRR: 3% daily on deposits from individuals (retail or professional), held in nostro balances or investment-grade sovereign paper (para 7.i).
CDs: minimum USD 2,500; 7 days to one year; issue to residents subject to FEMA (para 6). Subscribers must be told that CDs are “not covered by Deposit Insurance” and that LOLR is not available in IFSC (para 6.viii; CD circular, 20 July 2021, para 10).
No lender of last resort (Reg. 9).

Deposit insurance. Since July 2023, Reg. 18 says deposits “may be insured subject to applicability of and to the extent provided under” the DICGC Act, 1961; before, there was no scheme. Reg. 18 does not itself confer cover, and we found no text confirming DICGC cover for IBU deposits. IBUs must also comply with ss. 10–13 of the Banking Laws (Amendment) Act, 2025, in force from 1 November 2025 (circular, 12 December 2025).

Lending, including ECB to Indian borrowers

An IBU “may provide credit to any type of client in a specified foreign currency” (COB Module 16, para 3.i). It may make INR-denominated loans, with lending to residents subject to FEMA (COB Module 2, para 3.f). IFSCA’s circular of 8 December 2025 revised Module 16:

Point	Current rule
s. 20(1), Banking Regulation Act	Does not apply to a foreign bank’s IBU, but IFSCA’s restrictions do (para 4(i)(b))
Loans against parent’s shares	Prohibited (para 4.ii.a)
Loans to parent’s directors or related parties	Allowed under a policy: no conflicts, no better terms, interested persons excluded, home thresholds, audits, notice to IFSCA within 15 working days (para 4(ii)(b))
Buy-back loans	Allowed if the borrower’s home law permits (para 4(ii)(d))
Home-regulator limits	Still apply (para 4.iii)

ECB. The FEM (Borrowing and Lending) (First Amendment) Regulations, 2026 (FEMA 3(R)(5)/2026-RB, dated 9 February 2026) substituted Schedule I. They apply “from the date of their publication in the Official Gazette” (reg. 1(2)); that date is not stated in the text read. Under Schedule I:

recognised lenders include “A financial institution or a branch of a financial institution set up in IFSC” (para 2(c)), which covers an IBU. That is one condition only;
eligible borrowers are non-individual residents incorporated, established or registered under a Central or State Act and permitted ECB (para 1(1));
ECB may be in foreign currency or INR (para 3(1)); and
ECBs with a Loan Registration Number before commencement continue under the old rules, except reporting (reg. 1(3)).

Borrower eligibility, end-use, maturity, all-in-cost ceiling and reporting apply loan by loan. Schedule I’s values are not set out here.

Prudential rules and governance

An IBU follows IFSCA norms and its home regulator’s directions “unless otherwise specified by the Authority” (Reg. 4(2)).

Capital and leverage follow home rules; the IBU may rely on the parent’s ICAAP (PRU Module 4, paras 1.i, 2.ii–iii). A parent official certifies compliance quarterly, within 45 days (para 2.iv).
LCR and NSFR may be maintained by the parent “with the prior approval of the Authority” (Reg. 5).
Reserves: CRR exemption except on individuals’ deposits, which bear the 3% RDRR (Reg. 8; COB Module 11, para 7.i). We found no IFSCA text on SLR.
AML/CFT: IFSCA’s guidelines apply (Reg. 14).
People: the CEO/Head-IBU and Compliance Officer must be Approved Individuals (GEN Module 3, para 3.i.a). The Compliance Officer must work out of the IFSC and hold no other function (GEN Module 2, paras 9.iii–iv).
Governing body: meets “at least once each quarter” (circular, 8 April 2025).

Tax: section 147 and Schedule VI

From 1 April 2026, s. 147 of the Income-tax Act, 2025, as amended by the Finance Act, 2026 (s. 47), allows a 100% deduction of qualifying income:

s. 147(1) limb	Period (s. 147(2))
(a) a scheduled or foreign bank “having an Offshore Banking Unit in a Special Economic Zone”	20 consecutive tax years from the relevant tax year; and, where the tenth year of a ten-year s. 80LA period ended on 31 March 2025, a further 10 consecutive years from the tax year beginning 1 April 2026 (s. 147(2)(a)(i)–(ii))
(b) “a unit of an International Financial Services Centre”	20 consecutive tax years out of 25, “at the option of an assessee”

The Act says “Offshore Banking Unit”, not “IFSC Banking Unit”. It does not say which limb a GIFT IFSC IBU falls under, and the period differs: 20 consecutive years under limb (a), 20 out of 25 under limb (b). Limb (a) has a bridge for units whose ten-year s. 80LA period ended on 31 March 2025; limb (b) has none.

Filing: an accountant’s report in Form No. 35 (s. 147(4)(a); Rule 69, Income-tax Rules, 2026), plus the s. 23(1)(a) Banking Regulation Act permission “or” the IFSCA Act permission (s. 147(4)(b)).
New units: a unit starting on or after 1 April 2026 qualifies only if not formed by “splitting up or reconstruction or reorganisation or transfer of a business already in existence in India” (s. 147(5)). The test applies where an onshore book is moved into a new IBU.
Section 218 taxes s. 147(3) income at 15%. The Finance Bill 2026 Memorandum states that business income of these units “after the expiry of period of deduction will be taxed at rate of 15%” (p. 48; also Budget Speech 2026-27, Annexure to Part B, item 4(vi)). Section 218 does not use those words, and how MAT/AMT at 9% (s. 206) applies in the deduction years is not addressed in the guidance found. See GIFT City tax benefits for funds and fund managers.

Schedule VI excludes from a non-resident’s income: interest payable by an IFSC Unit “in respect of moneys borrowed by it on or after the 1st September, 2019” (Sl. No. 12); income from NDFs, ODIs and OTC derivatives with an IFSC offshore banking unit, subject to conditions (Sl. No. 5); and certain portfolio income received in an account with one (Sl. No. 7). The Act does not say whether deposits are “moneys borrowed”. For MAT, GST and the general regime, see GIFT City tax.

Where the Handbook is out of date

No Handbook version after 5 April 2024 was found. The Handbook is subject to:

Handbook	Current position
One IBU per IFSC, only as a branch (GEN Module 1, para 1.ii; PRU Module 1, para 1.ii)	Limit omitted and IBC allowed, 6 July 2023 (Reg. 3(1A))
No interest on current accounts (COB Module 11, para 4.v)	Interest allowed (circular, 14 June 2024)
CDs “not covered by Deposit Insurance” (para 6.viii)	Reg. 18 allows insurance under the DICGC Act; cover unconfirmed
No loans to parent directors; no buy-back loans (COB Module 16, para 4.ii)	Allowed on conditions (circular, 8 December 2025)
2021 fee circular (GEN Module 1, fn 1)	IFSCA-DTFA/1/2026, from FY 2026-27
Cites the RBI 2015 IBU circular (COB Module 2, fn 14)	No longer applicable (Reg. 22(1))

For how an IBU compares with other IFSC licences, see entity types and IFSCA licences. Group treasury centres in GIFT City typically need IBU accounts.

Common questions

What is an IFSC Banking Unit? A branch of an Indian or foreign bank licensed by IFSCA to operate in an IFSC (Reg. 2(1)(ec)). It is a non-resident for FEMA.

What is the minimum capital for an IBU in GIFT City? USD 20 million, held at the Parent Bank (Reg. 3(3)(a)). An IFSC Banking Company needs USD 50 million (Reg. 3(3A)(a)).

Can a foreign bank with no Indian branch open an IBU? Yes, if it meets additional requirements, including effective consolidated home supervision (Reg. 3(4); GEN Module 1, para 6).

Can Indian residents open accounts with an IBU? Yes. Individuals may use LRS, within USD 250,000 a year and IFSCA’s December 2024 directions. Other residents may open foreign currency accounts without prior IFSCA permission (circular, 13 August 2025). Account opening is separate from permission for each transaction.

Can an IBU lend to Indian companies? Yes, subject to FEMA. An IFSC branch is a recognised ECB lender (Schedule I, para 2(c), FEM (Borrowing and Lending) Regulations, as substituted in 2026). That is one condition; borrower eligibility, end-use, maturity, cost and reporting apply loan by loan.

Are IBU deposits insured? Not shown to be. Reg. 18 allows DICGC insurance “subject to applicability”, but we found no confirmation that cover applies. CDs must be disclosed as “not covered by Deposit Insurance” (CD circular, 20 July 2021, para 10; COB Module 11, para 6.viii). There is no lender of last resort (Reg. 9).

Sources

International Financial Services Centres Authority (Banking) Regulations, 2020 (IFSCA/2020-21/GN/REG004), consolidated as amended up to 14 July 2023. IFSCA, 18 November 2020. ifsca.gov.in
IFSCA (Banking) (Amendment) Regulations, 2024 (IFSCA/GN/2024/004). IFSCA, 4 July 2024; Gazette, 11 July 2024. ifsca.gov.in
Amendments and additions/deletions to the IFSCA Banking Handbook (F.No. 110/IFSCA/Banking Regulation/2024-25/1), with GEN v5.0, COB v6.0 and PRU v5.0. IFSCA, 5 April 2024. ifsca.gov.in ; GEN: ifsca.gov.in ; COB: ifsca.gov.in ; PRU: ifsca.gov.in
IFSCA banking circulars: Interest on current account (F.No. IFSCA-FMPP0BR/1/2021-Banking-Part (1)/1), 14 June 2024; Directions to IBUs for FCAs of resident individuals under LRS (F.No. IFSCA-FMPP0BR/1/2021-Banking-Part (1)/3), 13 December 2024, amended 23 June 2025; Opening of an account of a person resident in India (IFSCA-FMPP0BR/4/2024-Banking), 13 August 2025, corrigendum 2 September 2025; Amendments to Module 16 (Providing Credit) (110/IFSCA/Banking Regulation/2020-21), 8 December 2025; Implementation of the Banking Laws (Amendment) Act, 2025 (IFSCA-FMPP0BR/35/2025-Banking), 12 December 2025; SNRR account amendment (IFSCA-FMPP0BR/4/2024-Banking), 19 June 2026. IFSCA. Circular register: ifsca.gov.in
Revision to the requirement of meetings of the governing body of the IBUs in IFSC (IFSCA-FMPP0BR/8/2025-Banking/001). IFSCA, 8 April 2025. ifsca.gov.in
Fee structure for the entities undertaking or intending to undertake permissible activities in IFSC (IFSCA-DTFA/1/2026). IFSCA, 2 March 2026, applicable from FY 2026-27. ifsca.gov.in
Step-by-step workflow for setting up in IFSC on the SWIT portal (v1.0). IFSCA, 7 July 2026. ifsca.gov.in
Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (FEMA 339/2015-RB). RBI, 2 March 2015. rbi.org.in
Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 (FEMA 3(R)(5)/2026-RB). RBI, 9 February 2026. rbi.org.in
Remittances to IFSCs under the LRS (A.P. (DIR Series) Circular No. 15, RBI/2024-25/49). RBI, 10 July 2024. rbi.org.in
Master Direction – Liberalised Remittance Scheme (FED Master Direction No. 7/2015-16), updated to 6 September 2024, paras 1 and 11. RBI. rbi.org.in
Setting up of IFSC Banking Units (IBUs) (RBI/2014-15/533), historical, superseded by Reg. 22(1) of source 1. RBI, 1 April 2015. rbi.org.in
Income-tax Act, 2025, s. 147 (as amended by Act No. 4 of 2026). Income Tax Department. incometaxindia.gov.in
Income-tax Act, 2025, s. 218. Income Tax Department. incometaxindia.gov.in
Income-tax Act, 2025, Schedule VI, read with Finance Act, 2026, s. 125. Income Tax Department. incometaxindia.gov.in
Finance Act, 2026 (No. 4 of 2026), ss. 1, 47, 60, 125. Ministry of Law and Justice, Gazette of India Extraordinary, 30 March 2026. Official URL for the Act PDF not located
Income-tax Rules, 2026 (G.S.R. 198(E)), Rule 69. CBDT, 20 March 2026. incometaxindia.gov.in
Corrigendum to fee circular (IFSCA-DTFA/2/2026). IFSCA, 13 March 2026. Official URL not located
Guidelines for issuance of Certificate of Deposits by IBUs (F. No. 110/IFSCA/Banking Regulation/2021-22/5). IFSCA, 20 July 2021. ifsca.gov.in
Operations of subsidiaries and branches of Indian banks and AIFIs in foreign jurisdictions and in IFSCs – Compliance with statutory/regulatory norms (RBI/2022-23/145, DOR.MRG.REC.87/00-00-020/2022-23). RBI, 1 December 2022. rbi.org.in
Memorandum explaining the provisions in the Finance Bill, 2026. Ministry of Finance, 1 February 2026. indiabudget.gov.in
Budget Speech 2026-27, Annexure to Part B. Ministry of Finance, 1 February 2026. indiabudget.gov.in

IFSC Banking Unit (IBU) in GIFT City: Licence and Rules