**Executive Summary**
This circular, dated December 8, 2025, from the International Financial Services Centres Authority (IFSCA), announces amendments to Module no. 16 (Providing Credit) of the IFSCA Banking Handbook: COB directions v6.0. The changes address restrictions on loans and advances by International Banking Units (IBUs). The circular comes into force with immediate effect.
**Key Points / Main Content**
* **Amendments to Restrictions on Loans and Advances:**
* **Foreign Banks:** Restrictions under section 20(1) of the Banking Regulation Act, 1949 do not apply to IBUs of foreign banks, but loans or advances are subject to the conditions specified under para 4(ii) ("Restrictions by the Authority") of the module.
* **Loans/Advances to Directors/Related Parties:** IBUs granting loans or advances to a Director of its Parent Bank or to any related party of such Director shall adhere to the following requirements:
* Formulate and implement a relevant policy.
* Ensure the decision is free from conflict of interest.
* Ensure the terms are not more favorable than those offered to other parties under similar circumstances.
* Prevent individuals who may benefit directly or indirectly from participating in the approval process.
* Ensure thresholds specified by the home regulator of the IBU are adhered to.
* Ensure periodic audits are conducted.
* Inform the Department of Banking Supervision (DOBS) of the Authority within 15 working days of the transaction date.
* **Credit to Companies for Buy-back of Securities:** IBUs may provide loans to a company for buy-back of its securities, subject to the condition that the applicable law in the jurisdiction where the company is incorporated permits availing of such loans.
**Impact Analysis**
**All IFSC Banking Units (IBUs)**
* **Impact:** IBUs need to comply with the revised directions related to granting loans and advances, especially concerning foreign banks, directors/related parties, and credit for security buy-backs.
* **Action Required:** Update internal policies, procedures, and processes to align with the new guidelines. IBUs lending to directors/related parties of directors of parent bank must inform the Department of Banking Supervision (DOBS) within fifteen (15) working days of the date of the transaction.
Key Entities Referenced
International Financial Services Centres Authority (IFSCA): Authority issuing the circular and primary regulator for IFSC Banking Units.
IFSCA Banking Handbook: COB directions v6.0: Policy document being amended by the circular, specifically Module no. 16 (Providing Credit).
IFSC Banking Units (IBUs): Entities to which the circular's regulations apply.
Banking Regulation Act, 1949: Act referred to regarding restrictions on loans or advances.
International Financial Services Centres Authority Act, 2019: Act granting power to issue this circular.
e-file No. 110/IFSCA/Banking Regulation/2020-21 December 8, 2025
CIRCULAR
All IFSC Banking Units (IBUs)
Madam/ Sir,
Subject: Amendments to Module no. 16 (Providing Credit) of the IFSCA Banking
Handbook: COB directions v6.0
Reference may be drawn to the International Financial Services Centres Authority
(Banking) Regulations, 2020, and the circulars/directions issued thereunder, in
particular the directions regarding grant of loans or advances by IBUs, as outlined in
Module no.16 (Providing Credit) of the IFSCA Banking Handbook: COB Directions v
6.0.”
2. On review, it has been decided to amend the directions of the abovementioned
module as under:
A. The extant para 4(i)(b) shall be substituted by the following:
“Restrictions on loans or advances under section 20(1) of the Banking Regulation
Act,1949 shall not apply to the IBU of a foreign bank. However, loans or advances
granted by the IBU of a foreign bank shall be subject to the conditions specified under
para 4(ii) (“Restrictions by the Authority”) of this module"
B. The extant para 4(ii)(b) shall be substituted by the following:
“Loans or Advances to Directors or Related Party
IBUs, while granting loans or advances to a Director of its Parent Bank or to any related
party of such Director shall:
(i) formulate and implement a policy on loans or advances to such persons;
(ii) ensure that the decision to grant such loans or advances is free from conflict of
interest;
(iii) ensure that the terms and conditions of such loans or advances are not more
favourable than other loans or advances granted by the IBU to any other person under
similar circumstances;
Page 1 of 2(iv) prevent any individual who may, or whose family member may, benefit directly or
indirectly, from such loans or advances, from participating in the approval process for
such loans or advances;
(v) ensure that the thresholds, if any, on such exposures, specified by home regulator
of the IBU, are adhered to;
(vi) ensure that periodic audits are conducted to verify that such loans or advances
comply with the policy referred to in (i) above; and
(vii) intimate the Department of Banking Supervision (DOBS) of the Authority about
the grant of loans or advances to such persons within fifteen (15) working days of the
date of the transaction.”
C. The extant para 4(ii)(d) shall be substituted with the following:
“Restrictions on Credit to Companies for Buy-back of their Securities
IBUs may provide loans to a company for buy-back of its securities, subject to the
condition that the applicable law in the jurisdiction where such company is
incorporated permits availing of such loans.”
3. This circular is issued in exercise of the powers conferred by sections 12 and 13
of the International Financial Services Centres Authority Act, 2019, and shall come into
force with immediate effect.
Yours faithfully,
(Supriyo Bhattacharjee)
Chief General Manager
Head - Department of Banking
Page 2 of 2