The International Financial Services Authority (“ IFSCA ”) has issued a consultation paper on the “Draft IFSCA FinTech Sandbox Framework” dated September 19, 2025 (herein referred as “ Draft Framework ”) to facilitate growth of fintech innovations at IFSCs across Indian and foreign jurisdictions. The Draft Framework is issued in furtherance of the “Framework for FinTech Entity in the IFSCs” vide circular dated 27th April, 2022.
The Draft Framework is aimed at facilitating growth of FinTech innovations at IFSCs by enabling Regulatory and Innovation Sandboxes for FinTech activities across Banking, Capital Markets, Insurance, Funds etc. and technology enabled fintech/techfin use cases pertaining to the financial products, financial services and financial institutions which are regulated or likely to be regulated in the International Financial Services Centres (IFSCs).
Primary Objectives of the Draft Framework
- To promote the development and deployment of financial technology (FinTech) solutions that give rise to new business models, applications, processes, or products in areas and activities linked to financial services regulated by IFSCA.
- To facilitate the adoption of advanced and innovative technology-driven solutions (TechFin) that support and enhance activities related to financial products, financial services, and financial institutions.
Key Highlights of the Draft Framework
1. Applicability
The Framework shall apply to all eligible domestic and foreign entities, desirous of obtaining a limited use authorisation as FinTech Sandbox Entity (FSE) from IFSCA.
Any FinTech Entities who have obtained valid Limited Use Authorisation issued under “Framework for FinTech Entity in the International Financial Services Centres (IFSCs)”, dated April 27, 2022.
2. Key Definitions
FinTech: Clause 3(h) of the Draft Framework defines FinTech as: “FinTech includes financial technology products and/or solutions which result in new financial business models, applications, processes, financial products / financial services or advanced/innovative technology products and/or solutions which aid and assist activities in relation to financial products, financial services and financial institutions regulated/ or likely to be regulated by the Authority.”
FinTech Sandbox Entity: Clause 3(i) defines FinTech Sandbox Entity as: “An entity which has been granted Limited Use Authorisation by the Authority under this framework and shall include both Domestic FinTechs and Foreign FinTechs.”
Inter-Operable Regulatory Sandbox: Clause 3(l) defines Inter-Operable Regulatory Sandbox as: “A testing environment for innovative hybrid financial products and/or services falling within the regulatory ambit of more than one domestic financial sector regulator.”
Testing Partner: Clause 3(r) defines Testing Partner as an institution which is engaged in providing financial products and/or financial services or aids, helps or assists activities relating to financial products, financial services, or financial institutions, and with whom the Applicant has a Memorandum of Understanding (MoU), Letter of Intent, or a similar arrangement for developing and/or testing their FinTech idea/product/solution in sandbox.
3. Eligibility
The eligibility conditions for the Applicants are outlined as follows:
- The Applicant who proposes the use of innovative technology in its core product or service, business model etc. to financial products or financial services regulated or likely to be regulated by the Authority.
- The proposed FinTech idea(s)/ product(s)/ solution(s) by the Applicant must present an innovative idea/product/solution that significantly enhances existing financial services or products and incorporates adequate risk management strategies to prevent any adverse impact.
For Applicants from India:
- An entity incorporated as company under Companies Act 2013, or LLP under the Limited Liability Partnership Act, 2008 or a branch of an Indian company or LLP in IFSC.
- An entity registered with Department for Promotion of Industry and Internal Trade (DPIIT) as a start-up entity relating to FinTech.
- An entity which is regulated by any domestic financial sector regulator.
- An individual or a group of individuals affiliated with duly recognized research or academic institutions established in India.
Applicant from a jurisdiction not recognised as ‘High-Risk Jurisdictions subject to a Call for Action’ (commonly referred to as the FATF blacklist) by the Financial Action Task Force:
- An individual or a group of individuals affiliated with duly recognized research or academic institutions.
- An entity, including financial institutions.
The Applicant before applying shall mandatorily confirm the suitability under the International Financial Services Authority
(TechFin and Ancillary Services) Regulations, 2025, in relation to the proposed product(s)/solution(s).
4. Application Process
The Draft Framework highlights the process of application, approval, regulatory relaxation/exemptions, sandbox exit procedure and revocation of limited use authorisation to be adhered by the Applicant.
5. IFSCA FinTech Regulatory Sandbox (FRS)
The IFSCA FinTech Regulatory Sandbox will be a testing environment where the FSE can test its FinTech products/solutions in a live environment for the duration of the sandbox.
6. IFSCA FinTech Innovation Sandbox (FIS)
The FSE may access the Innovation Sandbox, which will be a testing environment where the FSE can develop and/or test its FinTech ideas/products/solutions in isolation from the live market based on market-related data made available by regulated entities in IFSCs.
7. Inter-operable Regulatory Sandbox (IoRS)
Domestic FinTech firms and Foreign FinTech firms shall be considered for IoRS provided that the entity has a financial technology product/solution/service whose business models, activities or features fall within the remit of more than one domestic financial sector regulator.
8. Overseas Regulatory Referral Mechanism / FinTech Bridges of IFSCA
Domestic FinTech firms and Foreign FinTech firms seeking access to the Overseas Regulatory Referral Mechanism/FinTech Bridges of the Authority shall be governed as per the provisions of the Memorandum of Understanding (MoU), collaboration or special arrangement between the Authority and corresponding overseas Financial Sector Regulators.
9. Activities Qualifying for FinTech
The proposed FinTech ideas/products/solutions shall be directly or indirectly linked to the following activities regulated by the Authority:
- Capital Markets including Corporate Finance, Sustainable Finance, Market Infrastructure Institutions and Investment Funds
- Banking including Finance Company, Payment Services (PSs) and Payment & Settlement Systems (PSSs)
- Insurance
- Pension
- Metals and Commodities
- Foreign University
- Financial Support Services
- Compliance and supervision of the above areas
- Any other area permitted by the Authority
Submission of Comments/Suggestions
The general public, market participants and stakeholders are requested to forward comments/suggestions latest by October 10, 2025 in the following format:
- Name and Details of the Person/Entity
- Organisation Name (if applicable)
- Contact Details – Phone and Email Address
- Clause No.
- Sub-clause
- Comments/Suggestions/Feedback
- Detailed Rationale
- Industry best practices comparable with parallel jurisdictions across the globe
Email: fe-sandbox@ifsca.gov.in
Copy to:
(i) Shri Joseph Joshy CJ, CGM & HoD, Department of Technology, IFSCA at joseph.joshy@ifsca.gov.in
(ii) Shri Mohit Kumar Nayak, Manager, IFSCA at mohit.nayak@ifsca.gov.in
(iii) Shri Amal P S, Manager, IFSCA at amal.ps@ifsca.gov.in
Source category: IFSC Insurance Office
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