Whalesbook
GIFT City Attracts Foreign Funds
The registration of Poornam Asset Management IFSC, a UK-based firm, marks a first for India's Gujarat International Finance Tec-City (GIFT City). It's the inaugural foreign Family Investment Fund (FIF) approved there. This move shows GIFT City's goal to become a global financial hub, drawing international money and companies under the International Financial Services Centres Authority (IFSCA). The IFSCA's updated fund management rules aim to create a flexible environment for foreign family offices. GIFT City has become a major financial hub, home to many banks, market intermediaries, and over 250 Alternative Investment Funds (AIFs), showing its growing appeal for international finance.
Indian Family Offices Face Hurdles
While GIFT City attracts foreign interest, Indian family offices wanting FIF status face significant obstacles. Major Indian firms like Catamaran Ventures and Premji Invest applied for FIF registrations in GIFT City in 2023. Premji Invest even got initial approval. However, final approvals are delayed because the Reserve Bank of India (RBI) needs to provide crucial clarifications. The RBI worries that easing capital controls could open doors for tax evasion and money laundering, and potentially affect exchange rates and foreign reserves. This regulatory caution has largely stopped new domestic FIF approvals, unlike the smoother path for foreign firms. As a result, many Indian family offices are using GIFT City's Alternative Investment Funds (AIFs) for global investments instead of the FIF route.
RBI Clash Creates Confusion
Further complicating matters, a regulatory dispute arose in March 2026. The RBI issued new guidance requiring entities in GIFT IFSC to file annual Foreign Liabilities and Assets (FLA) returns, classifying them as 'resident Indians' for this purpose. This contradicts GIFT City's long-standing status as a foreign jurisdiction under India's Foreign Exchange Management Act (FEMA), causing significant confusion for businesses there. Legal experts suggest this conflict might push general partners (GPs) to avoid India altogether and choose locations like Mauritius, Singapore, or Dubai, which offer clear regulations. The difference between Overseas Portfolio Investment (OPI) and Overseas Direct Investment (ODI) also creates a roadblock for single-family offices (SFOs) at GIFT City, preventing them from making foreign investments even with approvals.
AIFs: The Practical Solution
Due to the regulatory issues with FIFs, especially for domestic firms, Indian wealth managers are increasingly using AIFs in GIFT City for global investments. These AIFs, overseen by IFSCA, provide more flexibility, operate in foreign currency, and are treated as non-resident entities for FEMA, unlike AIFs regulated by SEBI within India. The latest IFSCA fund management rules have also lowered the minimum corpus for non-retail schemes from $5 million to $3 million, making fund management more accessible. This trend shows that Indian family offices are opting for these established, though less direct, structures to reach international markets from GIFT City.
Risks to GIFT City's Global Ambitions
The current regulatory climate presents a major challenge to GIFT City's goal of becoming a leading global financial center that also integrates India's domestic wealth. Indian family offices cannot fully use the FIF structure because of RBI's strict capital control concerns and recent regulatory confusion. This could actively discourage investment into India. If these problems aren't fixed quickly, India could lose business to financial hubs like Singapore, Dubai, and Hong Kong, which offer clearer regulations and a more predictable environment for managing wealth. This situation highlights a gap between the government's desire to internationalize India's financial sector and the cautious approach taken by regulators. This could slow the growth of domestic wealth management and push capital overseas.
Path Forward for GIFT City
The arrival of a foreign FIF shows GIFT City's regulatory framework is competitive internationally. However, for the hub to reach its full potential and connect India with global capital, resolving regulatory differences between IFSCA and the RBI is crucial. Clear, consistent rules for domestic family offices are needed to make the FIF framework truly work. Without this clarity, GIFT City might serve mainly as a channel for foreign money instead of a complete platform for both Indian and international wealth management. This could harm its long-term goals and competitive position.