What IFSCA has done
The International Financial Services Centres Authority (IFSCA) has prescribed financial soundness criteria for payment system operators (PSOs) in India's International Financial Services Centres (IFSCs). Circular e.F.No. IFSCA-FMPP0BR/12/2023-Banking-Part(2), dated 27 October 2026, is titled "Financial Soundness Criteria applicable to existing PSO(s) and applicants desirous of commencing Payment System in IFSC". It applies both to PSOs already operating a payment system in an IFSC and to applicants who want to start one.
The circular is issued under sections 12 and 13 of the IFSCA Act, 2019, and it takes immediate effect — there is no deferred commencement date in the circular. It is signed by Supriyo Bhattacharjee, Executive Director, Department of Banking. The operative criteria sit in Annexure-I, which is the third and final page of the circular.
💡 In one line: if you already run a payment system in an IFSC, you must meet the new financial soundness criteria within six months and then prove compliance every year; if you are applying to start one, you must prove it up front with a statutory auditor's certificate.
The legal footing
The circular is framed under the Payment and Settlement Systems Act, 2007 (PSS Act) — specifically section 10(2) read with section 18, and section 7(1)(vi). In practical terms, that is the provision-set under which the authority regulates payment systems and the entities that operate them. The circular does not re-open the authorisation framework itself; it adds the financial-strength layer that existing operators and new applicants must satisfy within that framework.
That distinction matters for readers who already hold an authorisation. Nothing in the circular, as read, says an existing authorisation lapses on its own. What it does say is that an existing PSO must bring itself into compliance with the Annexure-I criteria within six months, and must then evidence that compliance annually. The compliance obligation is therefore continuous, not a one-time filing.
The criteria: what each type of PSO must show
Annexure-I does not impose one flat number on everybody. It differentiates by the kind of payment system, which is sensible: a large-value payment system and a card network do not carry the same risk profile as a trade repository or a receivables-discounting platform. The criteria are as follows:
Two features of this table deserve attention. First, the two numeric floors are modest in absolute terms — USD 0.2 million for an LEI issuer and USD 1 million for a TReDS operator — but they are floors, not targets: falling below them at any point is non-compliance, not a reporting matter. Second, the Trade Repository test is dynamic rather than fixed: net-worth must cover at least one year's operating costs, so as the repository's cost base grows, the net-worth it must hold grows with it. A repository that was compliant last year on a smaller cost base can slip out of compliance purely because its operating costs rose.
For LVPS operators and card payment networks, the circular prescribes "sound financial status" without a number. That is a judgement-based standard rather than a bright line. Operators in these two categories should not read the absence of a number as the absence of an obligation: the annual statutory auditor's certificate (explained below) still has to be furnished, and the auditor will have to be satisfied that the status is in fact sound. In practice, these operators should be ready to evidence capital strength, liquidity and the absence of accumulated losses, rather than assuming the test is formal.
How net-worth is counted — and what is excluded
Where the circular prescribes a net-worth figure, it also defines net-worth, and the definition is strict. Net-worth is the aggregate of paid-up equity capital, compulsorily convertible preference shares, free reserves, share premium and qualifying capital reserves — minus revaluation reserves, accumulated losses, intangible assets and deferred revenue expenditure. Every exclusion in that list bites:
- Revaluation reserves do not count. A paper uplift in asset values cannot be used to meet the floor.
- Accumulated losses are deducted. A history of losses directly reduces the net-worth available against the test.
- Intangible assets are deducted. Goodwill, capitalised software and similar intangibles cannot inflate the figure.
- Deferred revenue expenditure is deducted. Costs parked on the balance sheet rather than expensed do not count as strength.
There is one further condition on the compulsorily convertible preference shares (CCPS) that count towards net-worth: the CCPS agreement must prohibit withdrawal. In other words, capital that the holder can pull out does not qualify. An applicant or existing PSO relying on CCPS to meet its floor should check that prohibition clause before filing its certificate — a CCPS instrument without it simply does not count, and the net-worth computation would have to be redone without it.
Deadlines and proof: existing PSOs vs new applicants
The circular draws a sharp line between those already operating and those yet to start:
The six-month window for existing PSOs runs from the circular dated 27 October 2026, so operators should treat the first half of 2027 as the hard stop for coming into compliance — not as a target to aim for, but as the last date by which the criteria must be met. The annual certificate cycle then runs on a fixed calendar: a certificate for the preceding financial year, furnished by 30 September each year. That means the first annual certificates under this regime will relate to the financial year that has just closed when the September deadline arrives, and operators should align their audit timetables so the certificate is ready well before September rather than being assembled in the last week.
For trade repositories, the half-yearly computation is an additional discipline on top of the annual certificate. Because the test is "at all times", a repository cannot dip below one year's operating costs mid-year and cure it at the next half-yearly computation: the level must be maintained continuously, and the half-yearly computation is the measurement point, not the compliance window.
For new applicants, the consequence of the certificate requirement is front-loaded diligence. The auditor's certificate must accompany the application itself, so the net-worth position — computed on the strict definition above, with the CCPS prohibition in place — must be settled before filing, not after. An application filed with a net-worth figure that later fails on the definition (for example, because revaluation reserves were included) risks delay at the very first stage.
Old vs new: what actually changes in practice
Before this circular, there was no single consolidated statement of financial soundness criteria of this form for IFSC payment system operators setting out, category by category, the net-worth floors, the net-worth definition and the certification cycle. The change is therefore less about a new regulator and more about a new, measurable floor under each type of operator. Three practical shifts follow:
- From general soundness to measured floors (for three categories). Trade repositories, LEI issuers and TReDS operators now face numbers that can be tested by an auditor — one year's operating costs, USD 0.2 million and USD 1 million respectively.
- From internal assessment to external certification. Compliance is no longer a matter for the operator's own say-so. A statutory auditor must certify it, annually for existing operators and at application for new ones.
- From point-in-time to continuous compliance (for trade repositories). The "at all times" requirement, measured half-yearly, turns net-worth into a standing obligation rather than a year-end snapshot.
What the circular does not do is also worth stating plainly. It does not set a numeric floor for LVPS operators or card payment networks; it does not prescribe penalties for non-compliance in its own text; and it does not change the underlying authorisation process under the PSS Act framework beyond adding the certificate. Readers should not infer consequences the circular does not state — the operative content is the criteria, the definition, the six-month window and the certification cycle.
Who is affected
The directly affected population is narrow but important: any entity operating, or seeking to operate, a payment system in an IFSC — in practice, GIFT City, Gandhinagar — in one of the five categories in Annexure-I. Within those entities, the work falls on three desks: finance (to compute net-worth on the strict definition and track it against the floor), company secretarial and compliance (to calendar the six-month window and the 30 September annual certificate), and the statutory auditors (who must be briefed early, since their certificate is the evidence the regulator will rely on).
Indirectly affected are the users of these systems — banks, market participants and businesses that route payments, trade reporting or LEI issuance through IFSC operators. A stronger, certified financial floor under the operator reduces counterparty risk for those users, which is the regulatory purpose of a soundness criterion. But users should also note the transition: an existing operator has six months to comply, so the full effect of the new floors will only be visible once that window closes and the first annual certificates are furnished.
What to do next
- Identify your category. Map your payment system to one of the five Annexure-I rows. If you operate more than one type of system, each may carry its own criterion.
- Compute net-worth on the circular's definition. Strip out revaluation reserves, accumulated losses, intangibles and deferred revenue expenditure. If you rely on CCPS, confirm the agreement prohibits withdrawal.
- Test against the floor. For a trade repository, compare net-worth with one year's operating costs (and set up the half-yearly computation). For an LEI issuer or TReDS operator, compare with USD 0.2 million or USD 1 million. For LVPS or card networks, assemble the evidence of sound financial status.
- Close any gap inside the six-month window if you are an existing PSO — through genuine capital measures, not through revaluation or intangibles that the definition excludes.
- Brief your statutory auditor now so the compliance certificate — annual by 30 September for existing PSOs, with the application for new applicants — is ready on time and on the correct definition.
- Calendar the cycle. Six-month compliance, then 30 September every year, plus half-yearly computations for trade repositories. Treat the September date as fixed, not movable.
Frequently asked questions
Does this circular apply to payment systems outside IFSCs?
No. It is an IFSCA circular for payment systems in International Financial Services Centres. Payment systems elsewhere in India are regulated under the PSS Act framework by the Reserve Bank of India, and this circular does not address them.
When does the circular take effect?
Immediately. It is dated 27 October 2026 and states immediate effect. Existing PSOs then have six months from the circular to comply with the criteria.
What is the net-worth floor for a TReDS operator?
A minimum net-worth of USD 1 million, computed on the circular's definition — which excludes revaluation reserves, accumulated losses, intangibles and deferred revenue expenditure.
What is the net-worth floor for an LEI issuer?
A minimum net-worth of USD 0.2 million, on the same definition.
Is there a numeric floor for LVPS operators and card payment networks?
No. For those two categories the circular prescribes "sound financial status" without a number. The annual statutory auditor's certificate still applies.
How often must a trade repository compute its net-worth?
Half-yearly, and the level — at least one year's operating costs — must be maintained at all times, not just at the computation dates.
When is the annual compliance certificate due?
By 30 September each year, for the preceding financial year, certified by the statutory auditor.
Can revaluation reserves be counted towards net-worth?
No. The circular's definition expressly deducts revaluation reserves, along with accumulated losses, intangible assets and deferred revenue expenditure.
What must a new applicant file?
A statutory auditor's certificate, furnished with the application, evidencing compliance with the applicable Annexure-I criterion.
Sources
Primary source: IFSCA Circular e.F.No. IFSCA-FMPP0BR/12/2023-Banking-Part(2) dated 27 October 2026 — "Financial Soundness Criteria applicable to existing PSO(s) and applicants desirous of commencing Payment System in IFSC", official IFSCA PDF: IFSCA official PDF. Listing: IFSCA NewSection, 27/10/2026 Circular entry. Statutory backdrop cited in the circular: Payment and Settlement Systems Act, 2007 (sections 10(2) read with 18 and 7(1)(vi)); IFSCA Act, 2019 (sections 12 and 13).
