IFSCA Regulatory Update: Mandatory Prior Approval for PSPs in Rupee Drawing Arrangements

The landscape of cross-border financial transactions within the International Financial Services Centre (IFSC) is undergoing a significant regulatory tightening. To fortify the financial ecosystem against illicit activities and ensure robust regulatory oversight, the International Financial Services Centres Authority (IFSCA) has promulgated a pivotal directive. Through Circular No. e.F.No. IFSCA-FMPP0BR/3/2023-Banking 2026-27/01 dated April 10, 2026, the regulatory body has established that Payment Service Providers (PSPs) must secure explicit prior authorization before engaging in Rupee Drawing Arrangement (RDA) frameworks.

This strategic move is designed to harmonize the operations of non-resident exchange houses with stringent anti-money laundering protocols and existing central banking frameworks.

Understanding the Regulatory Shift

The newly issued circular acts as a critical clarification and extension of previously established payment system protocols. It specifically targets entities functioning as PSPs within the IFSC jurisdiction, mandating that they cannot unilaterally commence operations under the RDA scheme.