The International Financial Services Centres Authority (IFSCA), the unified financial regulator in GIFT City, has proposed a comprehensive framework for managing unclaimed deposits in GIFT IFSC banking units. According to reports from Business Standard, the regulator has notified the IFSC Depositor Education and Awareness Fund Scheme, 2026 to establish a dedicated structure for handling unclaimed deposits as banking activity expands in the financial hub. The scheme addresses a genuine regulatory need as GIFT IFSC banking has grown quickly, while its deposits largely remain in foreign currencies, creating the need for a specialized framework to manage unclaimed funds.
As of March 2026, customer deposits in banking units in the IFSC stood at $8.98 billion, highlighting the significant scale of operations in the financial services center. As reported by Business Standard, this expanding volume of deposits, products and customer base has made establishing a dedicated framework for managing unclaimed deposits and safeguarding depositors' interests necessary for the regulator. The IFSCA Bulletin for January–March 2026 reports that retail deposits reached $1.72 billion, representing a 30.3% growth from the previous quarter, while corporate deposits remained relatively stable at $7.26 billion. This growth in retail deposits has made the proposed Fund's consumer-protection role clearer and more significant.
The draft scheme establishes a dedicated fund structure with a committee entrusted with administration responsibilities. According to the proposal, unclaimed deposits and other eligible amounts remaining unclaimed for 10 years or more will be transferred to the fund, aligning the norms with those of banking regulations in the domestic market. The committee will oversee investment of the fund's corpus and approve expenditures while ensuring outflows do not compromise the fund's ability to refund eligible depositors. The committee structure includes a Whole-Time Member of IFSCA as Chairperson, Executive Directors, a rotating Banking Unit head, one outside expert and an IFSCA officer as Member Secretary. However, the committee remains dominated by IFSCA officials and does not guarantee representation for depositors, consumer groups or overseas retail customers.
The framework addresses critical mechanisms including settling depositor claims, reimbursement to banking units, and utilization for depositor education and awareness. As reported by Business Standard, administrative costs, including committee expenses, will be met from the fund itself. The committee will be required to share details of income and expenditure with the Authority to help determine the interest payable to depositors, ensuring transparency in fund operations. However, the draft has significant shortcomings that require immediate attention. Clause 3(iv) requires every eligible amount to be converted into US dollars on the transfer date, but this creates foreign-exchange risk as the depositor's original contract may remain denominated in other currencies. The scheme lacks clear claim procedures, including no time limits, appeal processes, or legal-heir routes, and fails to provide a complete consumer-facing claim process.
ABC Live's comprehensive analysis of the draft scheme identifies several critical gaps that need addressing before notification. The analysis highlights that the scheme treats the IDEA Fund mainly as an accounting and reimbursement arrangement rather than a complete depositor-protection system. Key recommendations include defining claimant categories, preserving original currency entitlement, specifying exchange-rate conversion rules, adding independent depositor representation to the committee, and requiring quarterly tracing and pre-transfer customer alerts. The analysis suggests creating an IFSC unclaimed-deposit search gateway and establishing clear investment policies with statutory limits on duration, market risk, and currency matching requirements. With comments open until August 12, 2026, IFSCA has an opportunity to address these concerns and strengthen the framework before final implementation.
