The International Financial Services Centres Authority (IFSCA) has issued amendments to Module 16 of the IFSCA Banking Handbook governing the provision of credit by IFSC Banking Units (IBUs). The circular clarifies that restrictions under Section 20(1) of the Banking Regulation Act, 1949 will not apply to foreign bank IBUs, though such lending must comply with conditions specified under the Authority’s regulatory restrictions. New rules for loans or advances to directors of the parent bank or their related parties require IBUs to adopt internal policies, avoid conflicts of interest, ensure arm’s-length terms, exclude interested individuals from approval processes, follow home-regulator exposure limits, conduct periodic audits, and report such loans to the Department of Banking Supervision within fifteen working days. The amendment also permits IBUs to extend credit for corporate buy-backs if permitted under the company’s jurisdictional law. The circular takes immediate effect under Sections 12 and 13 of the IFSCA Act, 2019.
International Financial Services Centres Authority
e-file No. 110/IFSCA/Banking Regulation/2020-21 December 8, 2025
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;
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
