The International Financial Services Centres Authority (“IFSCA”), in exercise of the powers conferred under Section 12 and Section 13 of the International Financial Services Centres Authority Act, 2019, read with Regulation 146 of the Fund Management Regulations, 2025 (“FM Regulations”), vide Circular No. F. No. IFSCA-IF-10PR/7/2024-Capital Markets,[1] dated May 24, 2025, has issued a circular granting an extension of the compliance timeline under Regulation 132 of the FM Regulations,pertaining to the appointment of an independent custodian.
I. Background
Regulation 132 of the FM Regulations, 2025, mandates that a Fund Management Entity(“FME”) shall appoint an independent custodian based in the International Financial Services Centre (“IFSC”) for the following categories of schemes:
- Retail Schemes
- Open-ended Restricted Schemes
- Any other schemes managing Assets Under Management (AUM) exceeding USD 70 million (Seventy Million United Sates Dollars)
The said Regulation 132 of the FM Regulations permits exceptions in respect to the jurisdiction where local laws of the jurisdiction of the investee company require the appointment of a custodian in that jurisdiction. Additionally, a transition period of 12 (twelve) months was previously granted to FMEs with schemes taken on record and having custodial agreements with entities not based in IFSC prior to the FM Regulations coming into force (i.e., before February 19, 2025).
II. Key amendments
In response to industry feedback citing implementation challenges, the IFSCA has now granted an additional extension of 6 (six) months from the date of issuance of this circular, for compliance with Regulation 132 of the FM Regulations, applicable to:
- Schemes taken on record after the FM Regulations, 2025 came into effect (i.e., on or after February 19, 2025); and
- Schemes taken on record before February 19, 2025, without an existing custodial agreement as of that date.
III. Interim Measures
During this six-month extended period:
- FMEs may appoint an independent custodian in India or in any foreign jurisdiction, provided the custodian is regulated by a financial sector regulator in that jurisdiction.
- FMEs must be able to provide custodial information to the IFSCA upon request.
IV. Final Compliance Deadline
It is directed by the IFSCA that FMEs must ensure full compliance with Regulation 132 of FM Regulations by appointing an independent custodian based in IFSC, on or before the expiry of the extended 6 (six) month period.
[1]https://ifsca.gov.in/Viewer?Path=Document%2FLegal%2Fextension-of-timeline-for-appointment-of-custodian-under-regulation-132-of-the-ifsca-fund-management-regulations-202525052025100420.pdf&Title=Extension%20of%20timeline%20for%20appointment%20of%20Custodian%20under%20Regulation%20132%20of%20the%20IFSCA%20%28Fund%20Management%29%20Regulations%2C%202025&Date=24%2F05%2F2025