Guidelines for Implementation of the IFSCA FinTech Incentive Scheme

[Image omitted. See the official document.]

CIRCULAR

F. No. 389/IFSCA/FIP/2021-22

September 12, 2022

Subject: Guidelines for implementation of the IFSCA (FinTech Incentive) Scheme, 2022

1. BACKGROUND

1.1 Vide Gazette Notification number IFSCA/2021-22/GN/022 dated 02nd February, 2022, the International Financial Services Centres Authority (IFSCA) notified IFSCA (FinTech Incentive) Scheme, 2022 (hereinafter referred to as the "Scheme") with an objective to promote the establishment of a world class FinTech Hub, at GIFT International Financial Services Centre (IFSC) India.

1.2 Considering the importance of FinTech entities in providing innovative solutions to promote safety, inclusiveness, efficiency, choice and competition in the financial services market, IFSCA brought out a framework for authorization of FinTechs vide Circular dated 27th April, 2022 (hereinafter referred to as the 'FE Framework').

1.3 In terms of clause 8 of the Scheme, the IFSCA hereby specifies the detailed guidelines for implementation of the Scheme as under: -

2. ELIGIBILITY:

2.1 An FinTech Entity (FE) authorised under FE Framework referred at 1.2 above, desirous of availing incentive, shall meet the eligibility criteria and other requirements as specified under the Scheme.

2.2 The Grants contemplated under the Scheme shall be available to an FE:

• (1) which is part of the Authority's Regulatory or Innovative Sandbox; or
• (2) which is referred to the Authority under a FinTech bridge arrangement with a Counterpart Regulator; or
• (3) which has either participated or is participating in any Accelerator or Cohort or Special Programme supported or recognised by the Authority; or

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• (4) which is referred to the Authority by an entity(ies) having Memorandum of Understanding (MoU) or collaboration or special arrangement with it.

3. 'FIT AND PROPER' REQUIREMENTS

3.1 The applicant and its directors/ partners/ designated partners and its key managerial personnel have to meet the 'fit and proper person' criteria..

3.2. For the purpose of clause 3.1, the criteria for determining 'fit and proper person' would include -

• (i) integrity, reputation and character;
• (ii) absence of convictions and restraint orders;
• (iii) competence, including financial solvency

3.3 A person shall not be deemed to be a 'fit and proper person' if,-

• (i) such person has been convicted by a court for any offence involving moral turpitude or any economic offence;
• (ii) an order for winding up has been passed against such person for malfeasance;
• (iii) such person has been declared insolvent and not discharged;
• (iv) an order, restraining, prohibiting or debarring such person from accessing or dealing in financial products or financial services has been passed by a competent authority, and a period of three years from the date of the expiry of the period specified in the order has not elapsed;
• (vi) such person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;
• (vii) such person is financially not sound or has been categorized as a wilful defaulter;
• (viii) such person has been declared a fugitive economic offender; or
• (ix) such person suffers from any other disqualification as may be specified by the Authority.

4. MECHANISM FOR IMPLEMENTATION OF THE SCHEME

4.1 Process for sanction of grant

• i) The applicant shall submit an application form in the format specified in Annexure-1 hereto, along with non-refundable application processing fee of USD 100, to IFSCA.
• ii) On receipt of duly filled application form alongwith the fees, the application shall be processed in terms of clause 7 of the Scheme.

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4.2 Evaluation Committee

(1) The Evaluation Committee referred to in clause 7 of the Scheme shall be responsible for the technical evaluation, business evaluation, market potential, etc., with respect to the applicant before making its recommendations for the grant of incentive.

(2) The Committee shall meet at such intervals as it may deem fit and examine and assess the following aspects and anything else deemed appropriate:

• i. the satisfaction of eligibility criteria/requirements (general and specific to grants);
• ii. the business context/ problem statement;
• iii. the solution/product offered;
• iv. underlying technology;
• v. scalability (technological) & market potential
• vi. Business Model & Financial Potential;
• vii. applicability/relevance to grants;
• viii. technical specification/details;
• ix. background of the entity- team structure, capabilities & expertise;
• x. issues related to cybersecurity.

(3) The Committee may, if considered necessary, suggest additional conditions to be complied with or documents/information etc. to be provided by the FE for processing of application/grant of financial assistance.

(4) The Committee shall, after evaluation of the application, recommend the amount to be sanctioned and/or stages of its disbursal to the FEs.

(5) Based on the recommendation(s) of the Committee or otherwise the IFSCA may stipulate the pre-disbursement conditions, post-disbursement conditions and other relevant conditions in the sanction letter.

4.3 Internal Committee (1) The Internal Committee shall monitor post disbursement compliance, end use of grant, progress, milestone achievements and perform such other functions as may be specified. (2) The Internal Committee shall make recommendation to the Competent Authority with respect to eligible expenses and disbursement of grant, subject to the satisfaction of conditions, compliances and milestone achievements.

4.4 Disbursement of Grants (1) The disbursement shall be done on 'reimbursement' basis after submission of necessary documents, invoices, technical reports, etc. IFSCA shall normally release the disbursement within 30 working days of submission of all the documents.

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Provided that advance under the Scheme may be considered under exceptional circumstances with the approval of Chairperson, IFSCA.

(2) The grant may be disbursed in multiple tranches depending on the milestones achieved.

(3) The disbursement shall be made only in the bank account of the applicant.

(4) IFSCA, at its discretion may direct a periodic audit of accounts and milestone compliances, by third party auditors.

5.0 RELEASE OF GRANT TOWARDS REIMBURSEMENT OF ELIGIBLE EXPENSES

5.1 The eligible expenses of the FE shall be evaluated by the Internal Committee which after satisfying itself that the invoices and supporting documents are complete, bonafide, appropriate and in line with the FinTech's needs to successfully develop/ commercialize the product, shall recommend release of grant.

5.2 An illustrative list of eligible expenses may be specified by the Authority.

6. MILESTONE ACHIEVEMENT & SUBMISSION OF REQUISITE DOCUMENTS

6.1 The milestones to be achieved during different phases shall be finalized in consultation between the IFSCA and the FE.

6.2 The FE shall submit all necessary documents, technical reports, invoices of expenses incurred, utilisation certificate and such other documents/statements as and when required by the IFSCA.

7. CORPORATE GOVERNANCE AND REGULATORY REQUIMENETS

7.1 The FE shall develop framework on Corporate Governance and Disclosure Requirements as relevant to its business operations or as may be specified by IFSCA.

7.2 The FE shall designate a person as its Compliance Officer for ensuring compliance with all applicable laws including these Guidelines.

7.3 The FE shall ensure that the information provided to stakeholders is timely, accurate, relevant and is not misleading.

7.4 The FE shall submit relevant data, utilization certificate, business plan, financials (audited/provisional), etc. to IFSCA, as per the format and on such frequency as may be desired by IFSCA.

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7.5 The FE shall ensure compliance with Know Your Customer (KYC) and the Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) norms, as applicable.

8. ADDITIONAL CONDITIONS FOR GRANT

8.1 The incentive granted to an FE under the PoC Grant, Start-up Grant or Sandbox Grant shall be a one-time assistance given to it.