Payment services and payment systems are different
IFSCA's FAQs on the Payment Services Regulations draw the line clearly. A payment system is the set of instruments, rules, procedures and interbank transfer arrangements that move money. It comprises the operator (the payment system operator, or PSO) and its participants, such as banks, clearing and settlement systems and payment service providers. Payment services are the front end that customers use: accounts and e-wallets, payment instruments and payment apps. In IFSCA's words, PSPs operate at the front end and PSOs at the back end.
A PSP is authorised under the IFSCA (Payment Services) Regulations, 2024 for one or more of five services: account issuance, e-money issuance, escrow, cross-border money transfer and merchant acquisition. Payment transactions within a payment or securities settlement system between participants are expressly outside those regulations (Schedule I, Part B). They fall under the payment systems regime instead. See Payment services.
The legal basis
The Payment and Settlement Systems Act, 2007 is one of the RBI statutes listed in the First Schedule to the IFSCA Act, 2019. Under section 13 of that Act, RBI's powers under it are exercised in the IFSC by IFSCA. IFSCA made the IFSCA (Payment and Settlement Systems) Regulations, 2024 on 14 October 2024, under the IFSCA Act and sections 34B and 38 of the PSS Act. From their commencement, RBI's Payment and Settlement Systems Regulations, 2008 no longer apply in an IFSC. RBI guidance issued under those regulations continues, so far as applicable, until IFSCA replaces it (regulation 14).
When authorisation is needed
Every person who wants to commence or carry on a payment system in an IFSC must apply under section 5(1) of the PSS Act for authorisation under section 7(1) (regulation 4). A person who considers that its system is exempt may apply for exemption under the proviso to section 4(1) of the PSS Act, giving its reasons. IFSCA decides within ninety days (regulation 7).
IFSCA's circular of 6 June 2025 applies the rule to international payment systems. A PSP may join an international payment system to make or receive payments with banks or institutions outside the IFSC only with IFSCA's prior approval. An international payment system that lets PSPs or other institutions in the IFSC pay one another, and so affects IFSC transactions, needs authorisation itself under section 7(1).
IFSCA's fee schedule for PSOs indicates the kinds of system it expects: real time or deferred large value payment systems, trade repositories, issuers of legal entity identifiers, card payment networks, TReDS platforms and any other system.
The authorisation process
- Application in the form specified by IFSCA's circular of 23 October 2024: a Schedule I form and Schedule II additional information, in English, with foreign documents apostilled or notarised and a copy of the provisional letter of allotment for the proposed IFSC unit. A non-refundable application fee of USD 1,000 is payable.
- In-principle approval, requiring the applicant to meet section 7(1) of the PSS Act and any other conditions. It does not by itself entitle the applicant to authorisation (regulation 5).
- Authorisation certificate, issued on payment of the authorisation fee for the relevant category, with the date from which it takes effect. IFSCA may impose further conditions and may require a security deposit (regulation 6).
Once authorised, a system provider must comply on an ongoing basis with the CPMI-IOSCO Principles for Financial Market Infrastructures, so far as applicable (regulation 8). It must file its audited balance sheet, profit and loss account and auditor's report within three months of its year end, extendable by up to three months, and publish them on its website (regulation 11). Current fees are in IFSCA's fee circular; see IFSCA fees.
The Payments Regulatory Board
The PSS Act provides for a board, under section 3, to regulate and supervise payment systems. In the IFSC, the IFSCA (Payments Regulatory Board) Regulations, 2025, notified on 12 September 2025, govern the Payments Regulatory Board. They replaced IFSCA's 2024 regulations on the Board for Regulation and Supervision of Payment and Settlement Systems. In outline:
- the Board's composition is as set by section 3 of the PSS Act, and members nominated by the Central Government, other than public servants, serve four years and cannot be re-nominated;
- it meets at least twice a year, with a quorum of three members that must include the Chairperson (or, in the Chairperson's absence, the member appointed under section 3(3)(b) of the PSS Act) and a nominated member;
- it may delegate its powers and form committees; and
- it is supported by IFSCA's Division of Payment and Settlement Systems.
For an applicant, the practical point is that policy on payment systems in the IFSC is set through this Board within IFSCA, and applications go to IFSCA.