NextFin News - Payment companies are routing more of their cross-border business through GIFT City, and the reason is not cheap labour or India's domestic market. It is a regulatory structure that lets them operate globally from Indian soil while staying outside India's onshore rulebook. The International Financial Services Centres Authority, the single regulator created for the zone in 2020, opened a payment-services licence in January 2024 that requires as little as USD 100,000 of net worth to start, carries a 100% income-tax deduction, and settles in foreign currency. For firms that found the Reserve Bank of India's mainland framework capped, trade-only, and rupee-anchored, the offshore licence is the cleaner instrument.
The Licence That Changed the Economics
The shift is visible in the licence ledger. On June 1, 2026, fintech infrastructure provider Decentro became the first Indian payment aggregator to receive a final Payment Service Provider licence from the IFSCA, setting up a GIFT City subsidiary to offer multi-currency accounts, cross-border collections, international settlements and escrow. "With over 700 businesses already operating in GIFT City and demand for global payments infrastructure rising rapidly, this licence is our first step towards addressing key pain points in cross-border transactions, including compliance, payments and multi-currency account management," Decentro Founder and CEO Rohit Taneja said. Other cross-border fintechs — including Skydo, Xflow and LEXI — have pursued IFSCA PSP approvals alongside their RBI authorisations, building what advisers call a "dual-stack" model: a domestic entity for onshore flows and an IFSC entity for everything that crosses a border.
"With over 700 businesses already operating in GIFT City and demand for global payments infrastructure rising rapidly, this licence is our first step towards addressing key pain points in cross-border transactions, including compliance, payments and multi-currency account management," Decentro Founder and CEO Rohit Taneja said.
The licence covers five activities: account issuance including e-money accounts, e-money issuance, escrow services, cross-border money transfer and merchant acquisition. A "regular" PSP must hold net worth of USD 100,000 at commencement and reach USD 200,000 by the end of its third financial year; a "significant" PSP starts at USD 250,000 and scales to USD 500,000. The IFSCA endeavours to dispose of applications within six months, and operators must commence business within six months of receiving their certificate, with a possible three-month extension. A sandbox or limited-use authorisation can arrive in as little as four to six weeks, with full authorisation typically following within six to twelve weeks once documentation and capital evidence are in place. Compare that capital and timeline with the cost of maintaining parallel licences across Singapore, Dubai and London, each with its own regulator, capital lock-up and reporting regime, and the arbitrage becomes obvious: one regulator, one licence, five permissions, and a tax holiday.
The operating rules around the licence are what make it usable rather than decorative. A PSP must identify an IFSC banking unit or IFSC banking company to serve as its nodal bank — the bank through which it undertakes transactions. Customer funds must be safeguarded under the regulations' escrow and protection requirements, and the operator must maintain a risk-management framework covering third-party and outsourcing risk, anti-money-laundering and counter-terrorist-financing controls, disclosure and user-protection obligations, and a grievance-redressal mechanism that resolves complaints within 30 days. That is a supervised payments business, not a light-touch registration — which is precisely why counterparties and corporate treasurers will accept it.
The tax math is the second half of the pitch. Units in the IFSC qualify for a 100% deduction of total income under Section 80LA of the Income-tax Act for 10 consecutive assessment years out of a 15-year block, with a reduced minimum alternate tax base of 9%. Services provided to offshore clients from the zone are effectively zero-rated for goods-and-services tax. In the 2026 Union Budget, the government doubled the holiday window to 20 consecutive years out of 25, with a concessional 15% corporate rate afterwards — a change that turned a decade of certainty into two.
The Mechanism: Offshore by Legal Design, Not by Geography
The mechanism behind GIFT City's payments proposition is a legal fiction with real consequences. Under the Foreign Exchange Management Act, units in the IFSC are treated as a "person resident outside India." That designation means the zone is, for exchange-control purposes, offshore even though it is physically in Gujarat. Funds can be held and settled in foreign currency without the capital-control restrictions that apply in the domestic tariff area. For a payments company, that is the difference between running a global balance sheet and running an India-only one.
The RBI's Payment Aggregator – Cross Border framework brought order to online export-import flows, but it was designed for a bounded purpose: trade transactions, INR settlement, and per-transaction constraints that lean on domestic banking rails. A payment firm moving money for a global marketplace, a SaaS platform billing in dollars, or a remittance corridor cannot route everything through a trade-only, rupee-settled channel. The IFSCA PSP licence, by contrast, sits in a foreign-currency environment, covers trade and capital flows, and has no transaction cap.
The dual-stack model is the practical expression of this split. A firm keeps its RBI-regulated entity for domestic collections, UPI acceptance, and INR settlement — the high-volume retail pipe where India is unmatched. It then routes every cross-border flow — collections from overseas buyers, payouts to foreign vendors, multi-currency wallets for enterprise clients — through the IFSC entity. The two books are kept separate, with ring-fenced capital and distinct compliance regimes, but the firm operates both from the same country. That structure reduces reliance on traditional payment rails, which are often slow and cost-inefficient for the low-value, high-volume transactions that dominate modern digital commerce.
This is the structural point that the headline numbers obscure. GIFT City is not competing with UPI. It is competing with Singapore and Dubai for the layer of payments infrastructure that sits above domestic rails — the multi-currency accounts, the escrow wallets, the settlement engines that global fintechs actually need when they cross borders.
The Scale of the Prize, and the Cost of the Friction
The market these firms are chasing is enormous and expensive to serve. Cross-border payment flows reached USD 194.6 trillion in 2024 and are projected to hit USD 320 trillion by 2032, according to industry estimates. The cost of moving that money is the wedge: the World Bank's Remittance Prices Worldwide data for the third quarter of 2025 put the global average cost of a consumer remittance at 6.36% of the amount sent, more than double the UN's 3% sustainable-development target. Corridors into South Asia average around 6.2%; sub-Saharan Africa is higher still, near 7.7%.
India is both the friction and the opportunity. Remittance inflows to India reached USD 135.46 billion in the fiscal year ended March 2025, up 14%. Every basis point saved on that flow is worth hundreds of millions of dollars, and every hour of settlement time freed is working capital returned to a business. A GIFT City PSP that can settle in foreign currency, hold funds in escrow, and serve counterparties on both sides of a border without converting through the onshore system attacks that cost directly.
The ecosystem around the licence is also denser than it was, and it is growing fastest where payments actually move. Banking assets booked at GIFT IFSC reached USD 111 billion as of March 2026, up from USD 106.3 billion in December 2025 and USD 88.5 billion a year earlier, according to the hub's regulator. The zone hosts 38 banks, almost all of the major global names alongside the large Indian lenders. Total registrations and authorisations granted by the IFSCA reached 1,213 by March 2026, up from 1,114 three months earlier. Fund-management activity has concentrated as well, with 217 fund-management entities registered by March 2026. Payment transaction value inside the IFSC grew 370% quarter on quarter in the final three months of the 2026 fiscal year — the clearest single number showing that money is already moving through the new rails.
The lending shift tells the same story from the banking side. Banks at GIFT City disbursed nearly USD 20 billion in dollar loans to Indian corporates in the fiscal year ended March 2026 — more than a third of all such loans issued globally for Indian companies, up from a 16% share two years earlier, according to data from the IFSCA. That growth has pushed the hub past traditional centres including London and Singapore for India-linked offshore borrowing. A payment company does not move to a financial centre for the licence alone; it moves because the banks, the asset managers, and the treasury desks it needs are already there.
The Competitive Landscape: Why Not Singapore or Dubai?
The obvious question is why a payment firm would choose Gujarat over jurisdictions that have been doing this for decades. The answer is a trade-off between depth and cost, and it depends on what the firm is optimising for. Singapore's Monetary Authority and Dubai's financial free zones offer deeper liquidity, more mature correspondent networks, and legal systems with long precedents for cross-border disputes. For a firm whose priority is dollar clearing into the United States or euro settlement into Europe, those centres remain the default.
GIFT City wins on a narrower but increasingly valuable proposition: India connectivity at offshore economics. A payment firm serving Indian exporters, global capability centres, SaaS companies with Indian engineering teams, or remittance corridors into South Asia needs Indian market access. Doing that from Singapore means running an offshore entity that still must plug into Indian banks and Indian compliance. Doing it from GIFT City means the Indian connectivity is built into the jurisdiction — the same time zone, the same banking counterparties, and a regulator that consolidates powers that elsewhere sit with four separate agencies. The 2026 budget's extension of the tax holiday to 20 years and the introduction of foreign-currency share capital for IFSC companies removed two of the remaining frictions: the horizon problem for long-lived infrastructure investments, and the currency mismatch on the cap table.
The comparison is not abstract. The IFSCA was established on April 27, 2020, and began operations that year, consolidating the powers of the RBI, SEBI, PFRDA, and IRDAI within the zone. A single application window, a single set of rules, and a single supervisor cut the coordination cost that a payments firm would otherwise absorb when dealing with a central bank for payments, a securities regulator for e-money instruments, and an insurance regulator for embedded cover. That speed matters when product cycles run in weeks, not quarters.
The Counter-Thesis: Liquidity Still Lives Elsewhere
The strongest case against GIFT City is not regulatory — it is about depth. Singapore and Dubai have decades of correspondent-banking relationships, deeper offshore currency pools, and established legal precedents for cross-border disputes. A PSP licence is a permission slip; what moves money is the network of nostro accounts, clearing memberships, and correspondent lines behind it. If GIFT City's International Banking Units cannot open those lines quickly, or if the rupee remains thin in offshore trading, the tax holiday buys a cheap office but not a functioning payments hub. Network effects in finance are famously sticky: money goes where money already is. There is also a talent question — experienced payments compliance and treasury staff are concentrated in the established hubs, and recruiting them to Gujarat is a slower exercise than signing a lease.
That objection is real but time-bound. The correspondent network is a buildable asset, not a permanent condition, and it is being built faster than the sceptics assume: the dollar-lending share for Indian corporates moved from 16% to more than a third in two years, and the zone's payment transaction value quadrupled in a single quarter. The regulatory architecture — a single authority instead of four, and an offshore legal designation inside India — is the durable advantage; the banking depth is the catch-up variable. What Singapore built over thirty years, GIFT City is attempting in a decade, and the licence count suggests the first-mover window is still open. The talent gap is the more stubborn constraint, and it is the one most likely to slow the pace without breaking the direction.
What Comes Next: The Signal to Watch
The judgment here is structural, not cyclical. A cyclical move would revert when tax rates shift or when a single deal closes; a regime shift is encoded in rules, and the IFSCA payment framework is a rules change that will not unwind on its own. The question is not whether the direction is right but how fast the hub fills.
Short term, watch the licence count and the speed of authorisation — the IFSCA endeavours to dispose of applications within six months, and operators must commence business within six months of receiving their certificate. Medium term, watch correspondent-banking depth: the number of active nostro arrangements, the share of dollar lending routed through the zone, and whether payment transaction growth sustains beyond the base-effect quarter. Long term, the test is whether GIFT City becomes a routing hub for payments that have nothing to do with India — African remittances, intra-Asia trade settlement, dollar wallets for European marketplaces.
The base case is that the zone keeps winning licences and steadily adds banking depth, becoming the default offshore gateway for firms that need Indian connectivity without onshore compliance. The upside case is that it graduates into a genuine multi-corridor hub, competing directly with Singapore for non-India flows. The downside case is that correspondent lines lag, the rupee stays thin offshore, and GIFT remains a tax-efficient back office rather than a settlement centre.
The falsifying signal is simple and countable: if the number of active IFSCA-licensed PSPs does not rise materially over the next 12 to 18 months, or if the zone's share of dollar lending to Indian corporates stalls or reverses from its current level, the structural thesis is wrong and the licence is just a discount. So far, the ledger says otherwise.
The takeaway: payment companies are not choosing GIFT City because it is Indian; they are choosing it because it is offshore. The zone sells a foreign-currency licence, a single regulator, and a tax holiday — and for cross-border payments, that combination is worth more than proximity to the domestic market.
Explore more exclusive insights at nextfin.ai.
