IFSCA – Frequently Asked Questions (FAQs) on IFSCA FinTech Sandbox Framework, 2026

The International Financial Services Authority (“ IFSCA ”) has released the FAQs on IFSCA FinTech Sandbox Framework (herein referred to as “ FAQ ”). The FAQs are issued to provide comprehensive overview of the IFSCA FinTech Framework (“ Framework ”) and address common queries from stakeholders and potential participants.

The key highlights of the FAQ are as follows:

1. About the Framework

• The Framework provides eligible entities with a controlled and monitored environment to develop and test innovative financial technology ideas, products, and solution and has been introduced building on the outcomes of the earlier FinTech Entity Framework, 2022, evolving global FinTech trends, and stakeholder feedback.
• It aims to further promote innovation across various financial sectors, including banking, capital markets, insurance, fund management, and other segments within the IFSC.
• Effective date : The Framework has come into effect from March 16, 2026.
• The Framework supersedes all earlier circulars, frameworks, guidelines, and regulatory instruments relating to Sandbox activities in IFSCs, including:
• FinTech Entity Framework, 2022
• Framework for Regulatory Sandbox, 2020

Framework for Regulatory Sandbox, 2020

Treatment of Existing Authorisations : Entities holding a valid Limited Use Authorisation under the FinTech Entity Framework, 2022 shall continue to operate under the earlier framework until the expiry of such authorisation.

2. Types of Sandboxes

• The Framework provides for 4 types of sandboxes to facilitate innovation techniques as provided below:

• Relaxation in Compliance Requirements for FIS Entities : Entities operating under the IFSCA FinTech Innovation Sandbox (FIS) are subject to fewer compliance requirements. Accordingly, provision relating to –
• User consent and compensation disclosure requirement (Clause 20)
• Books of accounts and currency requirements (Clause 28)

Books of accounts and currency requirements (Clause 28)

• Regulatory requirements following exit from IoRS : Following successful exit from the IoRS, entities are required to obtain the necessary regulatory approvals from the IFSCA and/or the relevant associate regulator(s) prior to market launch, in accordance with the applicable Standard Operating Procedure (“SOP”). 3. Eligibility

Regulatory requirements following exit from IoRS : Following successful exit from the IoRS, entities are required to obtain the necessary regulatory approvals from the IFSCA and/or the relevant associate regulator(s) prior to market launch, in accordance with the applicable Standard Operating Procedure (“SOP”).

3. Eligibility

• Eligible Applicants : The Framework permits applications from both domestic and foreign entities, including:
• companies, LLPs, partnership firms and their branches in IFSC;
• DPIIT-recognised FinTech start-ups and entities regulated by domestic financial sector regulators;

DPIIT-recognised FinTech start-ups and entities regulated by domestic financial sector regulators;

• individuals or groups affiliated with recognised academic institutions, incubators, or accelerators; and

individuals or groups affiliated with recognised academic institutions, incubators, or accelerators; and

• foreign FinTech entities, legal persons, and individuals or groups affiliated with recognised research or academic institutions, incubators, or accelerators outside India.

foreign FinTech entities, legal persons, and individuals or groups affiliated with recognised research or academic institutions, incubators, or accelerators outside India.

Foreign applicants must not be based in jurisdictions identified by the Financial Action Task Force (“ FATF ”) as high-risk jurisdictions.

• Eligibility criteria or proposed solutions: The proposed FinTech idea, product, or solution must:
• leverage innovative technology;
• significantly enhance existing financial products or services;

significantly enhance existing financial products or services;

• demonstrate a genuine need for testing in a controlled environment;

demonstrate a genuine need for testing in a controlled environment;

• provide identifiable benefits to users or the financial ecosystem; and

provide identifiable benefits to users or the financial ecosystem; and

• incorporate adequate risk management measures.

incorporate adequate risk management measures.

4. Application Process

• Application stages: The application process comprises-
• a preliminary application stage, wherein the IFSCA assesses the suitability of the proposed idea, product, or solution; and
• a final application stage, which may be initiated only upon acceptance of the preliminary application.

a final application stage, which may be initiated only upon acceptance of the preliminary application.

• Submission & Fees : Applications are required to be submitted through the Single Window IT System (“SWIT”) portal, along with the applicable fees prescribed under the IFSCA Fee Circular dated April 8, 2025, as amended from time to time.

Submission & Fees : Applications are required to be submitted through the Single Window IT System (“SWIT”) portal, along with the applicable fees prescribed under the IFSCA Fee Circular dated April 8, 2025, as amended from time to time.

• Supporting Documents : The list of supporting documents required for the application process is provided in Annexure I to the FAQs.

5. Evaluation & Approval

• Applications will be evaluated based on factors including innovation, customer benefits, risk management, consumer protection, and the feasibility of deployment post-testing.
• FinTech Sandbox Entities may undertake market exploration activities within the IFSC during the Testing Stage, subject to the prescribed boundary conditions.
• Applicants may seek regulatory relaxations or exemptions, which may be granted, modified, or refused by the IFSCA.
• The IFSCA may grant an In-Principle Approval within 60 days, subject to the applicant satisfying the prescribed conditions, including the appointment of a testing partner.

6. Testing Stage

• The Testing Stage is valid for up to 12 months and may be extended by a further 6 months at the discretion of the IFSCA.
• FinTech Sandbox Entities (“FSEs”) are required to operate within the boundary conditions specified in the Limited Use Authorisation and obtain prior approval for any material changes during the Testing Stage.
• Physical presence in GIFT IFSC is generally not mandatory and depends on the type of sandbox and the nature of activities undertaken.
• FSEs are required to disclose key risks to users, obtain their consent, and specify compensation arrangements, if any, prior to onboarding them.
• During the Testing Stage, FSEs are required to submit monthly status reports before the 10th of every succeeding month, report any regulatory orders within 15 days of receipt, submit a final report covering key outcomes and learnings within 30 days of expiry of the Testing Stage, and maintain testing records for a period of 7 years from the date of exit from the sandbox.

7. Financial Requirement

FSEs operating under the FRS are required to transact in foreign currencies specified under the First Schedule to the IFSCA (Banking) Regulations, 2020, maintain records in freely convertible foreign currencies (other than INR), submit financial information in US Dollars, and furnish audited annual financial statements within 30 days of finalisation.

8. Exit & Revocation

• The Limited Use Authorisation (“LUA”) and any regulatory relaxations or exemptions expire upon completion of the Testing Stage, and early exit is permitted only with the approval of the IFSCA, subject to fulfilment of all obligations towards users.
• The IFSCA may revoke the LUA on grounds including misrepresentation, non-compliance with the Framework, failure to implement risk mitigation measures, insolvency proceedings, cyber security concerns, or activities detrimental to users or the public.
• While prior notice is generally required before revocation, the IFSCA may suspend the LUA without notice in the interest of the financial services market or the public, following which the FSE is required to implement its exit plan and submit an exit action report within 30 days.

9. Permissible Activities

• Applicants may develop and/or test FinTech solutions linked to –
• Capital Markets (corporate finance, sustainable finance, market infrastructure, investment funds)
• Banking (finance company, aircraft/ship leasing, payment services and systems

Banking (finance company, aircraft/ship leasing, payment services and systems

• Insurance or Re-Insurance,

Insurance or Re-Insurance,

• Pension, Metals and Commodities,

Pension, Metals and Commodities,

• Foreign University, Financial Support Services as per Appendix-2,

Foreign University, Financial Support Services as per Appendix-2,

• compliance and supervision activities, and any other area permitted by the Authority.

compliance and supervision activities, and any other area permitted by the Authority.

• Appendix 2 permits a wide range of ancillary and TechFin services, including AI/ML, big data analytics, cybersecurity, cloud computing, digital identity solutions, DLT, RegTech, and professional support services such as actuarial, legal, and risk management services.

10. Contact & Further Information

Applicants may seek queries and clarifications from the Division of FinTech Sandbox, Department of Technology, IFSCA at fe-sandbox@ifsca.gov.in , and access the Framework and related documents on the IFSCA website.

11. Annexures

Annexure I sets out the supporting documents required for the application process, while Annexure II prescribes the reporting formats and compliance requirements under the Framework (“Annexure I & II hereinafter referred as “ Annexures ”).

A copy of the FAQs along with the Annexures is attached herewith for your ready reference.

Source category: IFSC Insurance Office

Attachments

• IFSCA_FAQs_on_FinTech_Sandbox_Framework_10_June_2026.pdf