Public Comments on Draft Regulatory Framework for Dematerialisation of securities by entities in IFSC.

Public Comments on Regulatory Framework for Dematerialisation of securities by entities in the IFSC jurisdiction The consultation paper seeking comments/suggestions from the public on the draft Regulatory Framework for Dematerialisation of securities by entities in the IFSC jurisdiction was issued by IFSCA on October 27, 2025. The following comments/suggestions were received: Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Clarification require for the term "Securities" The rationale for the clarification asked is because mentioned in the Circular. We are working as a FME we issue units to clients in physical mode against (Cat-III Fund) [IFSC Branch] at GIFT City. One of their investments in the Scheme. We will be 1 2 our fund; Ambit India Ascension Fund is a Category required to convert those units from Physical to - III fund wherein the units are issued to clients. demat form, if the term "securities" include the Units Whether such units shall be part of the term issued to Clients in the Scheme. " Securities". Comments/Suggestions: The draft circular provides • As per Rule 9A of Companies (Prospectus and that “all entities in the IFSC jurisdiction are required Allotment of Securities) Rules, 2014, every unlisted to comply with the above directions within the public company is mandatorily required to issue and stipulated timeframe.” maintain its securities only in dematerialised form. Para 5: All entities in the IFSC It is requested that the IFSCA may clarify whether • As per Rule 9B, every private company (other than jurisdiction are the requirement for dematerialisation is: a small company) is similarly required to issue and required to comply facilitate dematerialisation of its securities. 2 with the above (a) mandatory for all entities established in IFSC, directions within irrespective of their status under the Companies • Therefore, clarity is required whether the IFSCA’s the stipulated Act, 2013; or mandate is universal (for all IFSC entities) or limited timeframe. to such companies already covered under the (b) applicable only to those entities for which Companies Act framework. dematerialisation is already mandated under Rule 9A and Rule 9B of the Companies (Prospectus and • Aligning the requirement with the Companies Act, Allotment of Securities) Rules, 2014. 2013 will promote regulatory harmony, ease ofParagraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information compliance, and avoid duplication or confusion for It is suggested that the mandate for IFSC entities. dematerialisation should be aligned with the provisions of the Companies Act, 2013 and the related Rules, to ensure regulatory consistency and avoid overlapping compliance requirements. Revised Clause Suggested: “All entities in IFSC that are required to dematerialise their securities under Rule 9A or Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 shall comply with the provisions of this circular. Other entities may voluntarily dematerialise their securities as per their business requirements.” Para 4.1 & 5 To ensure a To ensure ease of doing business and avoid smooth transition, Seamless Process / Grandfathering System: For repetitive compliance burden for entities already a depository in entities that have already obtained ISINs from compliant with domestic depositories. A 3 IFSC shall: domestic depositories, the migration process should grandfathering approach will facilitate smooth be seamless or through a grandfathering system, migration without disrupting existing records or 4.1. Ensure a avoiding duplication of documentation and costs increasing costs. seamlessParagraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information migration from Entities in IFSC that have already completed domestic dematerialisation with domestic depositories have depositories to undergone full KYC and documentation. Requiring minimise extensive documentation again will duplicate disruption for compliance efforts and cause operational delays. A issuers and simplified migration procedure would promote ease investors. of doing business and faster compliance with the Simplified Documentation: The migration procedure March 31, 2026 timeline. should be limited to a one-page 4 5. All entities in the declaration/document ensuring ease of compliance Moreover, the Government has earlier IFSC jurisdiction while maintaining necessary verification standards. demonstrated successful migration processes — are required to such as the transition from Service Tax and VAT to comply with the the Goods and Services Tax —which were above directions implemented seamlessly and without any additional within the cost burden on the stakeholders. A similar approach stipulated may be adopted in this case, enabling a smooth and timeframe. cost-free migration of existing ISINs from domestic depositories to IFSC-based depositories. Charges at Par with Domestic Depositories: The Maintaining parity in fee structure with domestic applicable charges for migration or new ISIN depositories will ensure fairness, avoid additional registration should be at par with the charges financial burden, and encourage compliance by prescribed in the annexure of domestic IFSC entities. depositories. Further, Issuers have already incurred charges for 5 Further, it is suggested that no additional charges ISIN allotment and maintenance with domestic should be levied by IFSC-based depositories for depositories. Charging again for migration would migration of ISINs already issued by domestic amount to duplication of costs and discourage depositories, as such entities have already paid timely transition. Waiving extra charges will depository and issuance charges earlier incentivize early compliance and align with IFSCA’s objective of reducing regulatory friction.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information New Applicants: Entities that have not yet obtained ISINs may be required to register directly with IFSC- This will create a clear distinction between existing 6 based depositories as per the prescribed norms and ISIN holders and new applicants, ensuring clarity documentation. and consistency in implementation. Entities in IFSC that have not obtained ISINs till date may be allowed to directly obtain ISINs from IFSC- based depositories in accordance with this This ensures clarity and smooth implementation. framework. The distinction between existing ISIN holders and 7 Para 2 new applicants helps avoid ambiguity and provides Proposed clarification: “Entities that have not yet a clear transition path for all IFSC entities. obtained ISINs shall apply directly to an IFSC- registered depository for ISIN issuance.” Include a clause directing both domestic and IFSC depositories to jointly prepare a migration protocol A coordinated migration framework approved by approved by IFSCA. to ensure uniformity and IFSCA will avoid inconsistent practices and data operational clarity. Further, it is recommended that reconciliation issues during the transition. 8 Para 4.1 IFSC depositories publish a standardized migration Standardized resources will improve transparency toolkit comprising FAQs, templates, and investor and reduce confusion among issuers and investors, notices, to guide issuers and investors through the thereby facilitating a smooth and efficient migration transition process in a transparent and consistent process. m anner.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Para 3 In order to provide sufficient time for transition, it has • While the intent to establish a clear transition been decided that framework is appreciated, the proposed timeline of Revised clause the entities in the 31 March 2026 may not provide adequate time for IFSC that have the entities to complete the operational and In order to provide sufficient time for transition, it has already procedural requirements associated with the been decided that the entities in the IFSC that have 9 dematerialised migration. The draft is still under consultation and already dematerialised their securities with the their securities the process of finalization; system readiness will domestic depositories in India shall migrate such with the domestic require additional time. securities to a depository in the IFSC by September depositories in 30, 2026. India shall migrate • An extended timeline till September 30, 2026, such securities to would enable a more orderly and efficient transition. a depository in the IFSC by March 31, 2 026. Para 4.2 Facilitate adequate disclosures Revised clause • The current draft does not specify the minimum regarding the content of disclosures, timelines for disclosures, or migration process, Shall publish on its website and distribute to all obligations on issuers/ depositories. The use of the 10 including account relevant IFSC Issuers a migration disclosure word “adequate” is subjective and open to varied opening checklist which shall include timeline of migration interpretation which could lead to inconsistent requirements and phases, account opening requirements for existing implementation across entities. procedural and new investors along with FAQs. guidance for issuers and i nvestors.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Para 6 Depository in IFSC shall submit a compliance report Revised clause to IFSCA by April • It is suggested to add a clause detailing the 30, 2026 Depository in IFSC shall submit a compliance report 11 consequences for non-compliance as that will confirming the to IFSCA by October 31, 2026 confirming the encourage timely migration and reports submission. completion of completion of migration by IFSC entities within the migration by IFSC prescribed timelines. entities within the prescribed timelines.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Entities in IFSC which are not wholly owned subsidiaries of parent entity should be exempted from this provision. Revised Clause: The securities issued by an entity in the IFSC are treated as foreign securities under the Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder. In order to promote In case of entities where other Indian entities/person regulatory coherence, it has been decided that the are also holding stake in the GIFT IFSC entity along entities in the IFSC jurisdiction shall obtain ISINs with Parent entity, then all those Indian entities / from a depository registered with IFSCA, instead of person would also require to hold demat account 12 2 domestic depositories, for the purpose of with IIDIL, which will attract extra cost to them. dematerialisation of securities and other permitted financial products issued by them: In view of the above, this provision should not apply to IFSC entities which are not wholly owned Provided that above provision does not apply to subsidiary entities which are not wholly owned subsidiary of Indian Parent Entity. Explanation: For the avoidance of doubt, it is clarified that while the mandate is to shift the issuance of ISINs from domestic depositories to a depository in the IFSC, the issuer may continue to use an International Central Securities Depository (ICSD)Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Suggestion: To provide sufficient time to the shareholders to Request to extend timeline up to July 31, 2026 open demat account in IFSC who already have 13 3 instead of March 31, 2026 to migrate securities to dematerialised holding of shares with the domestic depository in IFSC from domestic depositories in depositories in India. India. Para 4.1 Migration from domestic depositories may be The account opening and ISIN generation process effected on the basis of a consent letter provided by Ensure a is very tedious process requiring extensive the concerned IFSC entity to the respective seamless paperwork from foreign shareholders, beneficial depositories, without requiring re-submission of migration from owners, and directors of shareholders’ company. As documents already submitted at the time of account 14 domestic a business-friendly measure and to encourage opening with the domestic depository, and depositories to timely compliance, we request that IFSCA introduce depositories in the IFSC are directed to enter into minimise a mechanism whereby documents can be shared requisite arrangements with domestic depositories disruption for between depositories without requiring re- for the transfer of relevant information and issuers and submission. documents based on the consent letter. investors. Compliance and Monitoring Para 5 GIFT IFSC does not have a wide array of Depositary Participants (DP) as available in the domestic All entities in the Depository Participant registered with a depository market. Therefore, the IFSC entities will need to 15 IFSC jurisdiction in IFSC to ensure smooth transition during potentially appoint new DP which will also require are required to migration. contractual negotiations and related work. We comply with the recommend that sufficient period should be allowed above directions to IFSC entities to appoint new DP. within the stipulated timeframe.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Para 4 We recommend that Depositories in IFSC establish a dedicated helpline number and an escalation Depository to have a dedicated Helpline and 16 Responsibilities of matrix to address queries and resolve issues Escalation Matrix. Depository in the related to the migration process in a timely and IFSC efficient manner. The Clearing Corporation is fine with the timelines However, we would like to submit the following for consideration: 1. The Clearing Corporation welcomes the initiative 1. The migration has to be seamless and not add for having the entities dematerialised their securities any operational/compliance issues/challenges on with the Unified depository incorporated in IFSC the entities 2. The same should not add any additional 2. This will also ensure ease of doing business for cost/burden on the entities who have already 17 3 the entities in IFSC dematerialized their securities with domestic depositories. 3. A seamless migration process from domestic 3. There is a tripartite agreement for such depositories to IFSC depositories shall be provided arrangements between the depository, RTA and the and cost neutrality to be maintain for successful Issuers. The Clearing Corporation already has an adoption. arrangement with the RTA. It is submitted that provision can be made to continue with the same RTA/available RTA that can match the same c ommercials as per the existing arrangements.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information The Exchange is fine with the timelines However, we would like to submit the following: 1) The migration has to be seamless and not add 1) The Exchange welcomes the initiative for having any operational/compliance issues/challenges on the entities dematerialised their securities with the the entities Unified depository incorporated in IFSC 2) The same should not add any additional cost/burden on the entities who have already 2) This will also ensure ease of doing business for 18 3 dematerialized their securities with domestic the entities in IFSC depositories. 3) There is a tri-patriate agreement for such 3) A seamless migration process from domestic arrangements between the depository, RTA and the depositories to IFSC depository shall be provided Issuers. The Exchange already has an arrangement and cost neutrality to be maintain for successful with the RTA. It is submitted that provision can be adoption. made to continue with the same RTA/available RTA that can match the same commercials as per the existing arrangements.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information The paper suggests that all entities holding NRIs and non-resident investors are unlikely to securities in domestic depositories should shift to participate if the process involves PAN/Aadhaar IFSCA. Clarity is needed on whether this applies to requirements. Hence, an investor friendly both Funds and FMEs or only to Funds. Currently, alternative must be provided under the GIFT Background no GIFT funds have dematerialised their securities 19 regime. (Points 1-3) as NRIs/non-resident investors prefer avoiding the PAN/Aadhaar-based DEMAT process in India. The Additionally, a minimum fund size threshold (e.g., requirements and process to open DEMAT INR 10 million) should be considered below which accounts under this framework are not specified and dematerialisation should not be mandatory. could involve significant cost and time.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information 1. All major global custodians, reporting systems, trading systems and valuation platforms rely on ISIN of funds as the uniform identifier. Without ISIN, global custodians cannot map a security into their systems, discouraging international investment flows. 2. European union mandates all fund types (all categories of AIF, Mutual Fund, UCITS, etc.) that are attracting global investors to mandatorily have ISIN as a matter of cross-border identification. Update Explanation to para no. 2 of the proposed circular to include funds: 3. In accordance with the LSEG guidelines, issuer Para no. 2 In line with global benchmarks, especially UK and shall obtain ISIN for the securities such as Shares, 20 Explanation Europe, ISIN for funds set up at GIFT IFSC should Depository receipts, Units, All Debt Instruments be made mandatory to attract global investors. This including Treasury Bills, Stripped Coupons & should apply to all category of AIFs, Mutual Funds, Principal, Depository Receipts and all category of UCITS, etc. funds. 4. ISO 6166 provides that, at a minimum the ISIN shall be obtained by the financial and referential instruments viz. Equity, Debt Instruments, Entitlements, Structured Products, Derivatives, etc. 5. SEBI AIF Regulations mandates AIF to hold their investments in dematerialised form.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information 6. When a UCITS engages in cross-border marketing within the EU, the ISIN of each share class is mandatorily required. 7. At GIFT IFSC, the objective of funds is to attract global investors who needs to draw convenience and transparency from the fund where they are investing. Hence to provide confidence to investor through transparency, convenience of reporting and ease of transfer, mandatory ISIN should be adopted at GIFT IFSC for all fund types.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information This will enable foreign investors to consider IFSC ISINs for considering to invest and keep such an avenue open even when the same ISIN is re- Mandate all issuers of Eurobonds (with or without tapped. Para no. 2 listing) in IFSC to obtain their ISIN from IFSC 21 Explanation Depository, even though they have taken ISIN from In future tax benefits offered for IFSC listings could Euroclear and Clearstream. be further linked to IFSC issued ISIN. This will increase investor interest and eco system in GIFT IFSC with cascading business impact for all participants in GIFT eco system. Suggestion for Clarification on Definition of “Securities” Our suggestion is to explicitly specify the regulation or statute from which the definition of “securities” should be referenced for the purpose of this requirement. This will help avoid ambiguity and ensure uniform interpretation across stakeholders. Such clarification will promote consistency and For instance, it may be clarified whether the 22 2 reduce interpretational challenges for entities definition should be taken from: operating in IFSC. • The Securities Contracts (Regulation) Act, 1956 (SCRA), • The Companies Act, 2013, • Foreign Exchange Management Act, 1999 • Or any other specific IFSCA regulation. Following suggested text should be added in the Explanation provided under Paragraph 2.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Explanation 2 can be inserted as follows: The term ‘securities’ shall have the same meaning as defined under [insert name of the Statute/Regulation].Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information Suggestion for Extension of Migration TimelineWhile we fully support the objective of regulatory coherence, we would like to suggest reconsidering the proposed timeline for the following reasons: • Migration Complexity: The migration process will require detailed procedural guidance from depositories for issuers and investors, including account opening requirements and operational workflows. • Foreign Shareholder Considerations: Many investors in IFSC entities are foreign shareholders, A six-month timeframe will enable all stakeholders which adds additional compliance and 23 3 to effectively fulfill their respective responsibilities in documentation requirements. the migration process. • System Readiness: Depositories and market participants will need time to update systems, processes, and communication channels to ensure seamless migration. Revised paragraph 3 should read as follows: In order to provide sufficient time for transition, it has been decided that the entities in the IFSC that have already dematerialised their securities with the domestic depositories in India shall migrate such securities to a depository in the IFSC within six months from the date of issue of this circular.Paragraph No. of Comments/Suggestions along with revised Detailed rationale along with supporting Sr No. the Draft Circular Clause in line with the suggestion information It is suggested that IFSCA provide a phased A phased approach will reduce operational 24 2 implementation plan with interim milestones to help disruptions and allow entities to align systems and entities transition smoothly to IFSC depositories. investor communications effectively. Clarify whether penalties or regulatory Clear guidance on enforcement will ensure timely 25 3 consequences will apply to entities failing to migrate compliance and help entities prioritize migration by March 31, 2026. activities. A simplified and standardized digital migration Simplify the migration process from domestic process will reduce operational burden, minimize 26 4.1 depositories to IIDI GIFT depository by introducing errors and ensure faster compliance. It will also a standardized digital onboarding and transfer enhance investor confidence and reduce disruption protocol. during the transition period. Recommend that IFSC depositories publish a 27 4.2 standardized migration toolkit including FAQs, Standardized resources will improve transparency templates, and investor notices. and reduce confusion among issuers and investors. Note: During the public consultation, comments were received from various stakeholders. Modifications, if any, shall be suitably carried out in the circular.