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IFSCA – Approval of IFSCA FinTech Sandbox Framework

The International Financial Services Centres Authority (“ IFSCA ”) has issued a Circular dated March 16, 2026, bearing Ref No.: 505/IFSCA-FTec0FTEF/1/2023 on the IFSCA FinTech Sandbox Framework (“ Framework ”). The Framework revisits and builds upon the earlier sandbox regime introduced in April 2022, with the objective of enabling a more structured and flexible environment for testing innovative financial products and services within the IFSC. The Framework is issued pursuant to consideration of public comments received from the stakeholders by October 10, 2025 (“ Public Comments ”).

The Key highlights of the Circular are as follows:

  • Reference is drawn to the earlier circular titled “Framework for FinTech Entity in the IFSCs” dated April 27, 2022 (“ Framework 2022 ”), which laid down a framework for limited use authorization of FinTech entities in IFSC.
  • Based on the outcomes of the earlier framework, evolving global FinTech trends, stakeholder feedback, and the growing importance of financial technology in promoting innovation, the Authority has decided to issue a fresh framework for entities seeking limited use authorization as FinTech Sandbox entities.
  • The Circular aims to support innovation by providing access to different types of sandbox mechanisms, including Regulatory Sandbox, Innovation Sandbox, Inter-operable Regulatory Sandbox, and Overseas Regulatory Referral mechanisms across various financial sectors like banking, Insurance and other segments.
  • The Circular has been issued in exercise of powers conferred under Section 12 of the IFSCA Act, 2019 and shall come into force with immediate effect.
  • All existing provisions relating to sandbox activities in IFSC under earlier circulars, frameworks, guidelines, or other regulatory instruments shall stand superseded from the date of this Circular; however, actions taken under such earlier instruments shall continue to remain valid.
  • The Framework is structured into multiple parts dealing with different sandbox mechanisms and related operational aspects.

Furthermore, the IFSCA has also issued a press release dated March 16, 2025, on the approval of Framework (“ Press Release ”). The Framework introduces the following key enhancements:

  • Expanded eligibility to include individuals and groups affiliated with recognised academic institutions, incubators and accelerators, including those in India and FATF-compliant jurisdictions;
  • Two-stage application process through the Single Window IT System (“ SWIT ”), comprising a preliminary application to be evaluated within 30 days, followed by final application to be evaluated within 60 days;
  • Two-stage approval mechanism, including In-Principle Approval (“ IPA ”) followed by Limited Use Authorisation (“ LUA ”), subject to prescribed conditions;
  • Market exploration for developed products within the IFSC ecosystem in a controlled environment; and
  • Expanded testing scope covering financial services, products and institutions regulated or proposed to be regulated by IFSCA.

The Key highlights of the Framework, structured on a part – wise, are summarised below:

Summary of Key Provisions of the Framework

PartDescriptionOverview
Part IGeneral

Sets out the Comprehensive framework governing sandbox participation, including,

  • Applicability
  • Definitions
  • Eligibility
  • Permissible Activities
  • Application Process
  • Evaluation Criteria
  • Regulatory Relaxations/Exemptions
  • Approval Process
  • Testing Stage
  • Submission of Test Related Information
  • Maintenance of Books of Accounts, Records and Documents
  • Sandbox Exit
  • Revocation of Limited Use Authorization
  • Compliance with Other Requirements
Part IIIFSCA FinTech Regulatory Sandbox (“ FRS ”)

Provides for testing of proposed product(s)/ solutions under the FRS, including,

  • Testing within IFSC, including remote testing, with physical presence required where customer funds are involved or as directed by the Authority; and
  • Provides that provisions of Part I shall also apply to FinTech Sandbox Entities operating under the FRS.
Part IIIIFSCA FinTech Innovation Sandbox (“ FIS ”)

Provides for testing of proposed ideas/products/solutions under the IFSCA FinTech Innovation Sandbox (FIS), including:

  • Remote testing without requirement of physical presence in IFSC; and
  • Applicability of Part I, except for clause 20 and clause 28, to FinTech Sandbox Entities operating under the FIS.
Part IVInter – Operable Regulatory Sandbox (“ IoRS ”) with IFSCA as Principal Regulator

Provides for testing of FinTech products/solutions under the Inter-operable Regulatory Sandbox (IoRS), including:

  • Eligibility of domestic and foreign FinTech entities where the product/solution falls within the remit of IFSCA and one or more domestic financial sector regulators, with IFSCA acting as the Principal Regulator and other regulators as Associate Regulators;
  • Application and screening process in accordance with Part II for entry into IoRS, with IFSCA retaining discretion on admissibility of hybrid products/solutions;
  • Requirement to obtain authorisation from IFSCA and/or relevant regulators post successful exit from IoRS prior to market launch; and
  • Compliance with the Standard Operating Procedure (SOP) prescribed by the coordination group for IoRS.
Part VOverseas Regulatory Referral Mechanism/ FinTech Bridges of IFSCA

Provides for access to Overseas Regulatory Referral Mechanism / FinTech Bridges, including:

  • Participation of domestic and foreign FinTech entities subject to the terms of Memorandum of Understanding (MoU), FinTech Cooperation Agreement (FCA) or other arrangements between IFSCA and overseas regulators.
Part VIMiscellaneous

Provides for residual powers of the Authority, including:

  • Power to remove difficulties and ensure effective implementation of the Framework; and
  • Power to specify norms, procedures and issue clarifications, including relaxation through circulars or guidelines, as may be deemed fit.
Appendix – 1 

Specifies the permissible areas for FinTech solutions under the Framework, including:

  • Financial sector activities regulated by the Authority such as capital markets, banking, insurance/reinsurance, pension, metals and commodities and financial support services;
  • Ancillary areas including compliance, supervision and other activities permitted by the Authority.
Appendix – 2 

Sets out the list of permitted financial support and technology-enabled (TechFin) services in IFSC, including:

  • Ancillary services such as actuarial, advisory, auditing, compliance support, outsourcing, risk management, legal, consulting etc; and;
  • TechFin services such as Big data and analytics, artificial intelligence, cloud computing, cybersecurity, digital identity solutions, distributed ledger technology and other emerging technology-based solutions.

A copy of the Framework, Public Comments and Press Release is attached herewith for your ready reference.

Source category: IFSC Insurance Office

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