RBI mandates specific risk management protocols for Authorised Dealer banks operating IFSC Banking Units in inter-bank foreign exchange transactions.
Enhanced Oversight on IFSC-Based Inter-Bank Dealings
On October 12, 2026, the RBI issued Circular No. 27, reinforcing risk management obligations under the Master Direction on Risk Management and Inter-Bank Dealings for Authorised Dealer Category-I banks operating International Financial Services Centre (IFSC) Banking Units and standalone IFSC branches. Paragraph 2.3(iii) of Part A mandates adherence to strict internal control mechanisms and reporting protocols for inter-bank forex and money market operations.
The directive emphasizes segregation of functions, real-time monitoring, and comprehensive audit trails for transactions originating from IFSC units, which operate under a distinct regulatory and tax regime. These units are integral to India’s offshore financial activity and attract global capital, necessitating robust governance standards.
Legal practitioners advising banks in IFSCs must ensure compliance with these operational safeguards, particularly in cross-border liquidity management. The RBI’s focus reflects growing integration of IFSC units into the domestic inter-bank ecosystem and associated systemic risk considerations.
Citations
- Master Direction - Risk Management and Inter-Bank Dealings, July 05, 2016