India’s cross-border payments story has, until recently, been told almost entirely in the language of the mainland — Authorised Dealer banks, the erstwhile OPGSP arrangement, and now the Reserve Bank of India’s Payment Aggregator – Cross Border (PA-CB) framework. That framework did important work in bringing order to online export-import payment flows. But it was also built for a specific, bounded purpose, and its boundaries are now visible: a hard per-transaction cap, a trade-only mandate, and an INR-anchored settlement architecture that leans heavily on the domestic banking rails.

Alongside it, a second and materially different pathway has matured at GIFT City. The International Financial Services Centres Authority (IFSCA) — India’s unified regulator for the International Financial Services Centre (IFSC) — notified the IFSCA (Payment Services) Regulations, 2024, creating a Payment Service Provider (PSP) licence that lets payment businesses operate globally from within India, but in an offshore, foreign-currency environment. For fintechs building genuinely cross-border payment infrastructure, the PSP licence is quietly becoming the more powerful instrument. This article explains what the PSP licence is, who qualifies, how the business model works, and where its flexibility outruns the mainland PA-CB regime.

What is a PSP under IFSCA?

A PSP is an entity authorised by IFSCA to provide one or more defined payment services in or from the IFSC. The regulations recognise five such services: account issuance (including e-money account issuance), e-money issuance, escrow services, cross-border money transfer, and merchant acquisition. An entity may seek authorisation for any combination of these.

Two of these carry scope nuances worth flagging. “Merchant acquisition” is the licence’s home for payment-aggregation activity — offering merchants multiple payment methods and undertaking settlement of funds to them — but IFSCA has clarified that it does not extend to operating a payment gateway, which is treated as a technical service and sits outside the regulations. And “cross-border money transfer” is defined expansively: it captures money moving from the IFSC to a recipient in another territory (including India) or vice versa, and even a transfer between two persons both outside the IFSC — the physical presence of the sender or recipient in the IFSC is not a precondition, and it applies even where sender and recipient are the same person.

PSPs are then classified into two tiers. A Regular PSP is the default category; a Significant PSP is one whose business volumes cross prescribed thresholds — broadly, higher monthly transaction values or e-money balances — attracting closer supervision and higher capital. Two points of mechanics matter here: authorisation is applied for only as a PSP (one becomes a Regular PSP on grant), and Significant status is a designation the Authority confers once the volume thresholds are met — it is not something an entity applies for, and an existing PSP need not re-apply on crossing the threshold. The authorisation itself is perpetual, remaining in force until surrendered by the PSP or revoked by IFSCA.

Crucially, the regulator here is IFSCA and not the RBI. Within the IFSC, IFSCA exercises, in a single window, the powers that the RBI, SEBI, IRDAI and PFRDA would otherwise hold. The IFSC is also treated as a jurisdiction distinct from the domestic economy: an IFSC unit is a person resident outside India under the Foreign Exchange Management Act. This “onshore the offshore” design is what gives the PSP licence its distinctive character.

Eligibility criteria

The eligibility conditions are principle-based and benchmarked to mature global regimes such as Singapore’s Major Payment Institution licence, the UK’s Electronic Money Institution licence, and Hong Kong’s Stored Value Facility framework. In practice, an applicant must satisfy the following:

• Legal form. The applicant must be a company incorporated with its registered office in the IFSC. The company need not exist at the time of application — an Indian or foreign parent may apply and incorporate the IFSC entity as a condition of in-principle approval.
• Jurisdiction and integrity. The applicant, its promoters and controlling shareholders must be from a FATF-compliant jurisdiction — that is, not one identified in the FATF public statement as a high-risk jurisdiction subject to a call for action.
• Fit and proper. Directors, key managerial personnel and persons exercising control must meet fit-and-proper requirements, with IFSCA’s own assessment prevailing in case of divergence.
• Minimum net worth. A Regular PSP must hold net worth of USD 100,000 at commencement, rising to USD 200,000 by the end of the third financial year. A Significant PSP must reach USD 250,000 within 90 days of designation and USD 500,000 by the end of the third financial year. Net worth is measured on eligible components — paid-up equity, compulsorily convertible preference shares, free reserves, share premium and certain capital reserves — excluding accumulated losses, intangibles and deferred revenue expenditure.
• Operational readiness. Adequate infrastructure (office space, systems, personnel), financial soundness, relevant experience, and no prior refusal of authorisation to the applicant or its group.

Two categories are exempt from needing PSP authorisation: an IFSC Banking Unit or IFSC Banking Company, and a person licensed to issue credit cards within the IFSC.

Direct authorisation is not the only way in. IFSCA’s FinTech regulatory sandbox has served as the original gateway for cross-border payment innovators to engage with the IFSC ecosystem, and PayTech firms can still use it to pilot novel transaction models — embedded finance, cross-border e-commerce payouts, multi-currency wallets — in a controlled environment before committing to a full licence. For an early-stage or experimental proposition, the sandbox route lowers the initial regulatory hurdle while keeping the pathway to full authorisation open.

How to get authorised: the IFSCA process

The application mechanics are set out in IFSCA’s circular on the “Format and manner of seeking authorisation as a Payment Service Provider” (Circular IFSCA-FMPP0BR/3/2023-Banking dated 6 February 2024), read with the regulations. The process runs in four stages.

Stage 1 — Application. The application is made in the prescribed form, comprising Schedule I (the application form) and Schedule II (additional information). A useful feature of the design: the PSP company need not exist when the application is filed. The applicant is typically the parent company proposing to set up the PSP as a subsidiary or group company, so the entity that will ultimately hold the licence can be incorporated later, as a condition of approval. Schedule I is a common form across IFSC financial institutions, so applicants answer only what is relevant and note non-applicability where a field does not apply. The submission is made in physical form and in English (with certified translations, and apostille/notarisation for foreign documents), and incomplete applications are not considered. IFSCA treats the formal filing as the last step — prospective applicants are encouraged to engage with the Authority and walk through their business model before filing.

Stage 2 — In-principle approval. IFSCA scrutinises the application, seeking further information or clarification as needed. If satisfied that the applicant prima facie meets the requirements, it issues an in-principle approval listing the conditions to be satisfied before final authorisation. Deficiencies are referred back for rectification within a specified time; failure to cure them leads to refusal, and the applicant may withdraw at any point before grant.

Stage 3 — Setting up the company. A core condition of the in-principle approval is to incorporate a company with its registered office in the IFSC and infuse capital sufficient to meet the minimum net-worth requirement. This is also the stage at which the applicant appoints its nodal bank — an IFSC Banking Unit or IFSC Banking Company through which the PSP routes mandated transactions such as the escrow account and any security deposit — and encloses that bank’s letter of concurrence.

Stage 4 — Certificate of Authorisation. Once the conditions are met, IFSCA issues the Certificate of Authorisation, and the PSP must commence operations within the period specified in the regulations (six months, extendable by three).

What the application actually asks for is worth previewing with a client, because it sets the preparation agenda. Beyond corporate and ownership details (including ultimate-beneficial-owner disclosure and FATF-jurisdiction declarations for the parent, group and controlling persons), Schedule I calls for a five-year business plan and financial projections, the organisational and governance structure of the IFSC unit, an account of activities to be conducted from outside the IFSC and their risks, the IT-systems architecture, and the risk-management, compliance, AML/CFT and internal-audit arrangements — supported by a document checklist (certificate of incorporation, MoA/AoA, board resolutions, group-structure chart, three years’ audited financials, net-worth certificate, and proof of fee payment). Schedule II drills into the payment services sought, a full business-model breakdown, nodal-bank details, the source of net-worth funding, and activity-specific features — including customer, merchant and agent onboarding process flows, KYC/AML procedures, and an end-to-end transaction/process-flow diagram covering technology, security and settlement. A Section E declaration-cum-undertaking (fit-and-proper compliance, funds not being proceeds of crime, ring-fencing for branches, immediate notification of material changes) rounds out the pack.

How the business model works

The defining feature of the PSP model is currency. A PSP transacts in freely convertible foreign currency only — it cannot deal in Indian Rupees, save for meeting its own administrative expenses through a Special Non-Resident Rupee (SNRR) account. Business may be undertaken across a wide basket of specified foreign currencies — the US Dollar, Euro, Japanese Yen, UK Pound Sterling, Canadian Dollar, Australian Dollar, Swiss Franc, Hong Kong Dollar, Singapore Dollar, UAE Dirham, Russian Rouble, Swedish Krona, Norwegian Krone, New Zealand Dollar and Danish Krone. This is not a limitation so much as the point of the model: the PSP is built to handle the offshore leg of global money movement, cleanly separated from the domestic INR economy.

The deemed-offshore status of the IFSC is what makes this work. Since an IFSC unit is a person resident outside India, an investment from a jurisdiction outside India into the IFSC is treated as a non-resident-to-non-resident transaction, and India’s foreign exchange provisions do not apply, which saves the compliance cost. Coupled with IFSCA’s light-touch, principle-based approach, this gives PSPs materially greater control over foreign-exchange flows — enough to implement global payment structures such as netting arrangements, pre-funding mechanisms and other models that are difficult to run under the mainland regime. The result is a genuinely end-to-end proposition: a PSP can handle a cross-border flow from initiation to settlement within a single, unified ecosystem.

Funds are safeguarded through an escrow arrangement with an IFSC Banking Unit or IFSC Banking Company, operated via a nominated nodal bank of which IFSCA is informed for supervisory purposes. Settlement can route through offshore payment systems and global networks; IFSCA has clarified that offshore payment systems which do not touch local IFSC transactions need not even register with it, which sharply reduces the friction and correspondent-banking dependency that characterises mainland cross-border processing.

On top of the licence sit the usual pillars of a supervised payments business: a risk-management framework (including third-party and outsourcing risk), safeguarding-of-funds protocols, AML/CTF/KYC compliance under the IFSCA (AML, CTF and KYC) Guidelines, 2022, disclosure and user-protection obligations, and a grievance-redressal mechanism resolving complaints within 30 days. Once authorised, a PSP must commence operations within six months, extendable by up to three months on a timely request.

A cluster of design choices reinforces the model’s character. An e-wallet issued by a PSP may hold a defined set of specified currencies (USD, EUR, JPY, GBP, CAD, AUD, CHF, HKD, SGD, AED and RUB) but cannot hold Indian Rupees in any form and cannot store cryptocurrencies or stablecoins. Users cannot withdraw e-wallet balances in cash, consistent with IFSCA’s no-cash policy for the IFSC. A PSP is also prohibited from lending, advancing money or extending credit — the regime deliberately isolates payment activity from credit risk, which demands different skills and capital. Notably, IFSCA does not impose a blanket cap on personal e-wallet balances; consistent with its principle-based approach, it expects each PSP to set differentiated, dynamic caps calibrated to a user’s transaction history and risk profile.

The commercial wrapper is compelling. An IFSC unit can claim a 100% income-tax holiday under Section 80LA for any ten consecutive years out of its first fifteen, benefits from GST exemptions on qualifying IFSC and offshore services, and operates in a full foreign-currency, capital-account-convertible environment.

Where the PSP licence is more flexible than RBI PA-CB

The RBI PA-CB framework and the IFSCA PSP licence are often spoken of interchangeably because both concern “cross-border payments.” They are not interchangeable. The PA-CB regime regulates the domestic Indian leg of trade payments; the PSP licence regulates offshore, foreign-currency flows. The practical differences in flexibility are significant.

Three flexibilities stand out.

No transaction cap. The PA-CB regime limits the value of a single unit of goods or services (and per transaction) to ₹25 lakh. High-value cross-border flows simply do not fit. The PSP regime imposes no such ceiling, and no restriction on the nature of permissible transactions.

Capital-account reach. This is the sharpest distinction. A PA-CB is confined to import and export of goods and services — current-account trade. It cannot process capital-account transactions such as resident Indians investing abroad or non-resident Indians investing into India. A PSP can. For any business built around cross-border investment flows, treasury, or multi-currency capital movement, the PSP licence is the only one of the two that reaches the use case at all.

Lower friction and multi-currency freedom. The PA-CB architecture routes flows through domestic escrow, Import or Export Collection Accounts, and AD Category-I banks, with foreign exchange bought and sold only through an AD bank. The PSP operates in multiple foreign currencies, can plug into global payment networks, and avoids the AD-bank dependency, enabling faster settlement and more efficient currency handling.

None of this makes the PA-CB regime redundant. The IFSCA PSP framework is designed to complement, not replace, the RBI’s PA and PA-CB licences: the PA-CB remains the correct — and only — route for the domestic INR leg of trade payments involving Indian merchants and buyers. That is why the most capable players are not choosing between the two but combining them: a mainland PA-CB entity for the domestic trade leg, and a GIFT IFSC PSP unit for the offshore leg, run as separate but coordinated entities with careful ring-fencing. Cross-border fintechs including Skydo, Xflow and LEXI have pursued IFSCA PSP approvals alongside their RBI authorisations, and Decentro has secured a full IFSCA PSP licence — evidence that the “dual-stack” model is becoming the template for serious cross-border payment businesses. A dual structure also reduces reliance on traditional payment rails, which are often slow and cost-inefficient for the low-value, high-volume transactions that define modern cross-border commerce.

There is a further strategic dimension that is easy to miss. Many leading Indian banks have established their first offshore banking presence — as IFSC Banking Units — within GIFT City. For a PSP, this turns the IFSC into more than an offshore booking centre: it becomes a gateway to the Indian market itself, even for an entity operating solely within the IFSC framework. A PSP can build banking partnerships in GIFT City that may not be available offshore elsewhere, and in doing so gain exposure to the entire Indian diaspora and business ecosystem, serving payment needs across geographies with a single, well-regulated base.

The bottom line

For a fintech whose flows are domestic-trade-centric, capped and INR-denominated, the RBI PA-CB licence is well suited. For a business building genuinely global payment infrastructure — uncapped, multi-currency, spanning both trade and capital flows, and serving counterparties inside and outside India — the IFSCA PSP licence offers a materially wider operating envelope, with a favourable tax and foreign-exchange regime to match.

The decisive question is not which licence is “better,” but which leg of the payment flow the business is touching. Increasingly, the answer is both — and the PSP licence at GIFT IFSC is what makes the offshore half of that ambition possible from within India’s own borders.

This article is for general information and does not constitute legal or regulatory advice. The IFSCA and RBI frameworks referenced are evolving; specific structuring should be assessed against the current IFSCA (Payment Services) Regulations, 2024 and the RBI Payment Aggregator Directions, 2025.