The International Financial Services Centres Authority (IFSCA) on Monday issued a consultation paper proposing a regulatory framework to mandate the dematerialization of securities by entities operating within Gujarat International Finance Tec-City (GIFT City).
The proposal aims to enhance regulatory coherence, streamline market operations and ensure that securities issued in the International Financial Services Centre are held with depositories registered under the IFSCA.
Dematerialization is the process of converting physical securities, like paper share certificates, into electronic form, which is then credited to an investor’s demat account.
“It has been observed that certain entities continue to obtain International Securities Identification Numbers (ISINs) and hold securities through depositories located in the domestic jurisdiction, even when such securities are issued by entities established in the IFSC jurisdiction,” the regulator said in its consultation paper.
The IFSCA, which serves as the single regulator for developing and overseeing financial products, services, and institutions within IFSCs, noted that this practice creates regulatory overlaps and operational inefficiencies.
As things stand, India’s sole IFSC is located in GIFT City, Gandhinagar, and serves as a dedicated hub for global finance and technology.
The special economic zone was established to attract international firms and position India as a leading global financial centre.
Meanwhile, the proposed framework will allow issuers to continue using International Central Securities Depositories (ICSDs) for issuance and listing, as permitted under the IFSCA (Listing) Regulations, 2024, the regulator said.
To facilitate a smooth transition, entities that have already dematerialized their securities with domestic depositories must migrate to an IFSC-registered depository by 31 March 2026, it added.
The consultation paper noted that depositories in the IFSC will be responsible for ensuring seamless migration, providing clear disclosures, and assisting issuers and investors with procedural requirements. A compliance report confirming the completion of migration must be submitted to the IFSCA by 30 April 2026.
The IFSCA has invited public comments and stakeholder feedback on the draft framework by 16 November.
