Operational hurdles in KYC, high costs deter int'l investors in GIFT City

Mumbai, Mar 11, 2026

IFSCA mulling measures to ease onboarding of foreign nationals, including through video KYC

High costs and operational challenges in the know-your-customer (KYC) process have limited fund management entities (FMEs) at GIFT City from onboarding overseas investors, often restricting their offerings to offshore family offices and institutional investors, fund managers said.

They said the requirement for physical attestation of documents adds to time and cost, making it difficult to onboard individual clients.

Sources said the International Financial Services Centres Authority (IFSCA), the unified regulator for Gift-IFSC, has formed a committee and received representations from FMEs to resolve the challenges.

Fund managers have sought regulatory relaxations such as recognising prior KYC conducted by regional distributors, expanding the presence of KYC registration agencies (KRAs), and introducing greater flexibility in the KYC framework, which currently places the responsibility on FMEs.

“The responsibility of completing the KYC falls on the FMEs. A more practical approach would be to recognise jurisdictions with strong regulatory controls, and impose additional checks only for investors from jurisdictions where such safeguards are weaker,” said a senior official at an FME.

KYC verification requirements vary depending on the investor’s jurisdiction. At present, there is one KRA in the GIFT-IFSC.

“For non-resident Indians (NRIs) and foreign investors, physical original application along with supporting documents is required. They (foreign investors/NRIs) need to courier the physical application, which adds a lot of costs for the investor. Second, the attestation has to be from the officials in the respective jurisdictions depending on the type of investor, adding up to the operational challenges,” said Jay Kothari, lead investment strategist and head of international business at DSP Mutual Fund.

Kothari added that even in case of NRIs based in the UAE, Singapore, or Hong Kong, the money raised has to be routed through a registered distributor there — unless the investor has directly reached out to the FMEs which can be accommodated via reverse solicitation.

“This clarity is not there in every jurisdiction, making FMEs very cautious of how they approach,” he added. DSP is one of the largest CAT-3 AIF (alternative investment fund) managers within the GIFT-IFSC with assets of around $1 billion raised from overseas institutions.

Another fund manager noted that in global markets, a significant portion of retail investments happens through platforms that host multiple mutual funds and similar investment products.

“These platforms onboard both funds and investors. Investors invest through the platform, which aggregates and sends trades to the funds. A similar platform-based mechanism should be available in GIFT City,” the person said, adding that conducting separate KYCs for multiple jurisdictions from GIFT City is operationally complex. Accepting KYCs completed by distributors in those jurisdictions could ease the process, he added.

As of December 2025, there were 202 FMEs operating in GIFT City with over 313 schemes launched. While fundraises have crossed $17.34 billion, total commitments have exceeded $32 billion.

However, industry participants said most overseas inflows — cumulative data for which is not publicly available — have largely come from family offices and institutional investors.

IFSCA allowed retail schemes from the financial hub last year. While the regulator also enabled video KYC for NRIs, fund managers said the facility does not eliminate the requirement to submit physical application forms.

“It is not applicable to all investment products,” an industry official said.

Sources added that the IFSCA is working to extend the video KYC framework for foreign nationals also. Alongside, it has allowed acceptance of KYCs of Indians completed by the KRAs.

Emailed queries to IFSCA remained unanswered till the time of going to press.

Obstacles in the way

• Regulatory ambiguity across required documents makes FMEs cautious in outreach

• Jurisdiction-specific compliances also a problem

• Physical attestation of documents increases time and expense for foreign investors

• Video KYC for NRIs allowed, but challenges persist for foreign nationals

• Most overseas inflows still from family offices and institutions

[The Business Standard]