Venture Capital schemes
A Venture Capital scheme filed under this Part is treated (for Income Tax Act, FEMA and related purposes) as a Category I Alternative Investment Fund 'venture capital fund'.
GIFT IFSC
Understand FMEs
A simple, structured guide to the IFSCA (Fund Management) Regulations, 2025.
GIFT IFSC · Plain-English guide
Understand FMEs
A simple, structured guide to the IFSCA (Fund Management) Regulations, 2025
Go section by section through what an FME is, who regulates it, the three categories, registration, schemes, day-to-day obligations and supervision. Each section links to the regulation it rests on.
Download the PDF guideIndia’s Global Financial Centre
Understand FMEs
01
Section 1
What is an FME?
An FME is the entity that manages funds, schemes or portfolios from an International Financial Services Centre. It must be registered with IFSCA before it starts.
“Fund Management Entity” means an entity registered with the Authority as a Fund Management Entity under any of the categories specified in these regulations.
Regulation 2(1)(n)
No entity can carry on fund management business in the IFSC without first getting an IFSCA Certificate of Registration as an FME under one of the specified categories.
What an FME manages is called a scheme or fund: a “Scheme” or “fund” means a scheme of a FME launched under these regulations (Regulation 2(1)(gg)).
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NextWho regulates FMEs02
Section 2
Who regulates FMEs
FMEs are regulated by the International Financial Services Centres Authority (IFSCA), the regulator for financial services in India’s IFSCs, including GIFT IFSC in Gujarat.
“IFSCA” or “Authority” means the International Financial Services Centres Authority established under sub-section (1) of Section 4 of the Act.
Regulation 2(1)(q)
The “Act” means the International Financial Services Centres Authority Act, 2019 (50 of 2019). The FM Regulations are made under it, and IFSCA issues circulars, FAQs, forms and reporting formats that sit around the Regulations.
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NextThe three FME categories03
Section 3
The three FME categories
Regulation 3(4) sets three categories. Each category includes the activities of the one before it, and each has its own minimum net worth under the Second Schedule.
| Category | Minimum net worth | What it can do |
|---|---|---|
| Authorised FME | USD 75,000 | Venture Capital schemes for accredited investors or investors above the threshold (private placement), and a Family Investment Fund for a single family. |
| Registered FME (Non-Retail) | USD 500,000 | Everything an Authorised FME can do, plus restricted schemes, Portfolio Management Services (including a multi-family office) and investment manager for privately placed REITs and InvITs. |
| Registered FME (Retail) | USD 1,000,000 | Everything above, plus retail schemes open to all investors, ETFs, and investment manager for REITs and InvITs raised by public offer. |
i“Registered FME” shall mean a FME which has received a Certificate of registration as Registered FME (Non-Retail) or Registered FME (Retail) (Regulation 2(1)(dd)). A Retail FME relying on the second track-record route in Regulation 6(2)(a)(ii) needs net worth of at least USD 2 million.
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NextBecoming an FME04
Section 4
Becoming an FME
An applicant has to meet the eligibility conditions in Chapter II before IFSCA grants a certificate of registration. The application is filed on IFSCA’s Single Window IT System with the declarations in the First Schedule.
- Legal formRegulation 5
Fixes the permitted legal forms. An FME must be a company, LLP, branch, or other form allowed by IFSCA. A Registered FME (Retail) cannot be an LLP or a branch. A branch is allowed only if the entity is already regulated for similar activity in India or a foreign jurisdiction. A Retail FME must have at least four directors, half of them independent and not associated with the FME.
- Track recordRegulation 6
Requires a sound track record and reputation for fairness. For a Retail FME this is quantified: either the FME group has five years managing at least USD 200 million for more than 25,000 investors, or persons controlling at least 25% of the FME have five years in fund-management-related activity for at least 1,000 investors on at least USD 50 million, with the FME holding net worth of at least USD 2 million. For Non-Retail and Authorised FMEs, it is relevant employee experience.
- Key managerial personnelRegulation 7
Every FME must designate a Principal Officer responsible for overall fund management, risk management and compliance; Registered FMEs must additionally designate at least one further KMP as Compliance Officer.
- Net worthRegulation 8
An FME must meet and continuously maintain the minimum net worth prescribed in the Second Schedule (or as otherwise specified by IFSCA) for as long as it holds registration — not just at the time of applying.
- Fit and properRegulation 9
The applicant, its Principal Officer, directors/partners/designated partners, KMPs and controlling shareholders must be, and must remain, 'fit and proper' — covering financial integrity, reputation, honesty and absence of disqualifying events.
- InfrastructureRegulation 10
The FME must have adequate infrastructure (office space, equipment, communications, manpower) commensurate with its operations, and a dedicated, secured office accessible only to authorised persons.
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NextSchemes and activities05
Section 5
Schemes and activities
Once registered, an FME can launch the schemes and run the activities its category allows. The main ones are below; each has its own Part of the Regulations and its own learning module.
Restricted schemes (Category I, II, III)
Restricted Schemes are a flexible, non-retail category launched by Registered FMEs for strategies such as start-ups, SMEs, infrastructure, ESG, special situations and other socially/economically desirable areas.
Retail schemes
Retail Schemes pool money from the general public (or a section of investors) via an offer document, launched only by Registered FMEs (Retail).
Special Situation Funds
A Registered FME may launch a Special Situation Fund under this Part.
Exchange Traded Funds
Only Registered FMEs (Retail) may launch ETFs, by filing a draft offer document at least 21 working days before launch; the offer document is valid for 12 months from IFSCA's on-record communication.
ESG obligations
FMEs managing AUM above USD 3 billion (or another specified threshold) must establish ESG governance policy and related obligations; as amended, fund-of-funds AUM is excluded when testing this threshold.
Portfolio Management Services
Only Registered FMEs may offer Portfolio Management Services, and only to specified client categories (persons resident outside India, NRIs, and eligible non-individual residents under FEMA outward-investment permissions).
REITs and InvITs
Anyone wanting to operate an Investment Trust (REIT or InvIT) in IFSC must register with the Authority. Funds may be raised by public issue with listing, private placement with listing, or private placement without listing. The recognised stock exchange specifies the detailed framework for listed trusts.
Family Investment Funds
Family Investment Funds are exempt from the standard FME legal-form (Reg 5) and net-worth (Reg 8) requirements, must reach USD 10 million minimum investment within 3 years, and may add investment vehicles that are aggregated for that USD 10 million test; as amended, the Authority formally records actions taken on the Reg 30 AIF-category classification.
Third-party fund management (Chapter VI, Part D, inserted w.e.f. 30 July 2025) lets a Registered FME manage restricted schemes on behalf of a regulated third-party manager, with the FME remaining responsible. Angel Funds are a sub-category of Venture Capital scheme, governed by IFSCA’s Angel Funds circular. Both are covered in the Quiz Centre and the Source library.
06
Section 6
Running an FME
Registration is the start. Chapter VIII sets the obligations that apply every day, and IFSCA circulars add the detail (reporting formats, KMP changes, certification and more).
Code of conductRegulation 118
Every FME, its fiduciaries and KMPs (including the Principal Officer, fund managers and the designated Compliance Officer) must abide by the Code of Conduct in the Third Schedule.
Books and recordsRegulation 119
Every FME must keep proper books of account, records and documents per scheme to explain transactions and disclose financial position at any time; as amended, this expressly includes records of internal policies, frameworks, plans and SOPs prepared to comply with the regulations.
Reporting to IFSCARegulation 120
The FME, its fiduciaries and any involved person must furnish reports, returns, statements and particulars accurately and on time, in the manner and intervals the Authority specifies, and must provide any information the Authority calls for within the time given.
Business continuityRegulation 121
A registered FME must maintain a business continuity plan for emergencies and significant disruption, update it on any material change, and review it annually.
Change in controlRegulation 125
A FME must obtain the Authority's prior approval for any direct or indirect change in its control; a branch that must take prior approval from its home sectoral regulator only informs the Authority within 15 days. The Authority may impose conditions, including an investor exit opportunity.
CustodianRegulation 132
The FME must appoint an independent custodian for retail schemes, open-ended restricted schemes, and all other schemes with AUM above USD 70 million (fund-of-funds with custodian-appointed underlying schemes are exempt). The custodian must be IFSC-based; the January 2026 amendment allows a 24-month transition window during which an India/foreign-jurisdiction regulated custodian may be used.
Scheme annual reportRegulation 134
FMEs must prepare a Scheme Annual Report (with abridged summary) for each FY; as amended, the submission-to-Authority and investor-disclosure timelines are both extended from 4 months to 6 months after FY-end.
AuditorRegulation 135
Every scheme's annual accounts must be audited by an auditor independent of the FME, appointed by the fiduciaries; the auditor's report forms part of the Annual Report. As amended, this requirement does not apply to FMEs wholly backed by sole Government/Government-related investors.
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NextSupervision and enforcement07
Section 7
Supervision and enforcement
InspectionRegulation 138
The Authority may, on its own motion or on information/complaint, appoint an Inspecting Authority to inspect an FME's books, records, systems and procedures for the specified purposes; notice is normally given, but may be dispensed with in investors' interest for recorded reasons.
Action in case of defaultRegulation 143
The Authority may take action, including suspension or cancellation of registration, where an FME fails to exercise due diligence or meet registration conditions, contravenes the Act/regulations/circulars, fails to furnish information, gives false/misleading information, does not file returns, does not cooperate with inquiries, fails to resolve investor complaints, or otherwise acts against investors' interests.
Relaxation of strict enforcementRegulation 144
The Authority may, for recorded reasons and in the interest of market development, relax strict enforcement of any requirement; a relaxation application (with fee and grounds) is processed within 60 days of a complete application.
08
Section 8
How the rules fit together
- The ActInternational Financial Services Centres Authority Act, 2019 — sets up IFSCA and its powers.
- The RegulationsIFSCA (Fund Management) Regulations, 2025, as amended. The binding rules this portal explains.
- Circulars and directionsIssued under the Regulations (Regulation 146). Circulars under the repealed 2022 Regulations continue unless superseded (Regulation 148(5)).
- FAQs and guidanceIFSCA’s explanations. Helpful, but the Regulations prevail where they differ.
- Forms and reporting formatsHow applications and periodic reports are filed.
On commencement, the 2022 Fund Management Regulations are repealed and two named 2024 circulars are superseded, with savings so that prior actions, applications, rights and liabilities continue under the corresponding new provisions, and surviving circulars/guidelines are deemed issued under these regulations until superseded.
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NextWhat changed recently09
Section 9
What changed recently
- 2022IFSCA (Fund Management) Regulations, 2022 Superseded
The first dedicated fund-management framework for GIFT IFSC, later repealed by the 2025 regulations.
- 2025IFSCA (Fund Management) Regulations, 2025 Principal
The current principal regulations. On commencement they repealed the 2022 regulations and superseded two 2024 circulars, with savings for prior actions.
- Jan 2026Principal regulations amended (to 30 January 2026) Amendment
The base text now in force reflects amendments up to 30 January 2026 — including the custodian transition window and the additional winding-up grounds.
- Sep 2026Second Amendment Regulations, 2026 Latest
IFSCA/GN/2026/015, in force 7 September 2026. Restructured the FME contribution formulae, redefined 'associate', extended the annual-report timeline, updated the PMS advisory cross-reference to the 2025 CMI Regulations, and added new contribution exemptions.
The Second Amendment’s commencement is shown as 7 September 2026 in this portal’s lesson content and as 10 September 2026 in the consolidated text used for the Quiz Centre. Confirm against the Gazette notification.
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NextWhere to go next10
Section 10
Where to go next
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This is a learning and compliance-preparation tool. Plain-English readings, practical notes, 'what changed' summaries, the timeline and calculators are the portal's interpretation and do not replace professional advice or the notified Gazette text of the IFSCA (Fund Management) Regulations, 2025 and its amendments.
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Published in The Chartered Accountant (Jun 2025, Jan 2025, Mar 2024) and Chartered Secretary (Aug 2023)
Prashant Kumar is a seasoned Company Secretary and corporate governance strategist with more than 13 years of experience advising large corporates, promoter-led groups and global businesses on compliance, regulatory risk and board governance. In GIFT IFSC, the IFSCA regime is his day job rather than a research topic.