IFSCA Tightens FCA Use Rules for Residents in IFSC

Circular No. F. No. IFSCA-FMPP0BR/1/2021-Banking-Part(1)/3; Dated: 23.06.2025

The International Financial Services Centres Authority (IFSCA) has issued amendments to the existing directions governing the operation of Foreign Currency Accounts (FCA) maintained by Indian resident individuals with IFSC Banking Units (IBUs). These accounts are typically opened under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India.

1. Mandatory Declaration Requirement Introduced

Under the amended norms, IBUs are now required to obtain a mandatory declaration from the resident individual (RI) at the time of using funds from the FCA for financial activities in the IFSC. Specifically, the RI must confirm that:

• The amount being utilised from the FCA is either being spent for the same purpose that was declared while originally remitting the funds under LRS, or
• The intended use of funds falls within the permissible purposes under the LRS framework.

2. Objective of the Amendment

This measure has been introduced to ensure:

• Enhanced compliance with the LRS guidelines prescribed by the Reserve Bank of India.
• Transparency and accountability in the usage of remitted funds.
• Preventive monitoring against misuse of foreign currency accounts for unpermitted financial services or products.

3. Impact on IBUs and Resident Individuals

• For IBUs – They must now incorporate appropriate compliance checks and documentation protocols to collect, verify, and maintain these declarations from resident individuals.
• For Resident Individuals – They must be mindful of declaring the accurate purpose while remitting funds under LRS and ensure that subsequent utilisation aligns with those declarations or falls within the list of permissible uses.

4. Conclusion

This amendment reinforces the regulatory oversight of the IFSCA and ensures alignment with India’s foreign exchange management framework. Both financial institutions and resident individuals operating in the IFSC ecosystem must take note of this procedural compliance to avoid regulatory lapses.

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