IFSCA FinTech Incentive Scheme

Overview

The FinTech Incentive Scheme, as per the International Financial Services Centres Authority (IFSCA) notification (scheme-2022_gazette-notification), is a framework designed to regulate and support the growth of FinTech (Financial Technologies) entities. The scheme primarily provides grants to eligible FinTech entities under certain terms and conditions.

Here are some key aspects of the scheme:

Launch and Tenure: The scheme came into effect upon its official publication in the gazette and will initially be operational for three years from the date of its commencement.
Definitions: The scheme provides clear definitions of terms such as FinTech Entity, Domestic FinTech Entity, Foreign FinTech Entity, Accelerator, Cohort, Applicant, and more, ensuring clarity for participants.
Incentives: The scheme provides monetary incentives to FinTech entities that meet established criteria.
Application Evaluation: Applications for grants will be evaluated by an Evaluation Committee set up by the Authority.
Eligibility: To be eligible for the grants, FinTech entities must either be part of the Authority’s Regulatory or Innovative Sandbox, participate in the Authority’s supported Accelerators, Cohorts, or Special Programs, or be referred by entities including regulatory or supervisory bodies having Memoranda of Understanding (MoU) or collaboration or special arrangement with the Authority.
FinTech Start-Up Grant: One of the incentives includes a FinTech Start-up grant. This grant is used for developing a product or a service and related 'go-to-market' initiatives for a start-up with a novel FinTech idea or solution.

International Financial Services Centres Authority (FinTech Incentive) Scheme important keywords

‘Accelerator’ or ‘Cohort’: Business programs run by companies or incubators that support early-stage, growth-driven FinTech companies through education, mentorship, and other forms of support.

‘Domestic FinTech Entity’: A resident individual or an entity incorporated or established in India, including in the International Financial Services Centres (IFSCs), and regulated by the Authority under the appropriate framework or regulations.
‘Evaluation Committee’: A committee set up by the Authority for the evaluation and processing of applications made under this Scheme.
‘Financial Institution’: Shall have the same meaning as assigned to it under clause (c) of sub-section (1) of Section 3 of the Act.
‘FinTech’: A technologically enabled innovative solution aiding or assisting Financial Institutions in the delivery of Financial Products or Financial Services.
‘FinTech Entity’ or ‘FE’: A Domestic FinTech Entity or a Foreign FinTech Entity.
‘Foreign FinTech Entity’: A non-resident entity from outside India which is regulated by the Authority to undertake FinTech related activities in the IFSC.
‘Incentive’: Monetary grant given to the FinTech Entities under the terms and conditions of this Scheme.
‘Innovation Sandbox’: A testing environment where FinTech Entities can test their ideas and solutions in isolation from the live market, which may add value to financial products or financial services offered in IFSC, based on data made available to them by the Financial Institutions operating in IFSC.
‘International Financial Services Centre’ or ‘IFSC’: Shall have the same meaning as assigned to it under clause (g) of sub-section (1) of Section 3 of the Act.
‘Inter-Operable Regulatory Sandbox’: This would typically refer to a framework that allows for testing financial innovations across different regulatory domains or jurisdictions in a controlled environment.
‘Minimum Viable Product' (MVP): The most basic version of a product that can be released to market, with just enough features to satisfy early customers and provide feedback for future development.
‘Proof-of-Concept’ (PoC): A realization of a certain method or idea to demonstrate its feasibility, or a demonstration in principle, with the aim of verifying that some concept or theory has the potential of being used.
‘Prototype’: An early sample, model, or release of a product built to test a concept or process or to act as a thing to be replicated or learned from.
‘Regulatory Sandbox’: A framework set up by regulators that allows FinTech startups and other innovators to conduct live experiments in a controlled environment under the regulator's supervision.

Now after understanding the important definition and related words now lets explore the eligibility criteria of FinTech Incentive Scheme.

Eligibility criteria for IFSCA FinTech Incentive

The eligibility criteria for the FinTech Incentive Scheme, as outlined in the International Financial Services Centres Authority (IFSCA) FinTech Incentive Scheme 2022 notification, provide a framework for determining which applicants can apply for incentives under the scheme. According to the available information from the source document, an applicant must satisfy any of the conditions mentioned below to be eligible:

Applicant from India: The scheme outlines specific categories for Indian applicants which include:
Entity registered with DPIIT: This pertains to an entity that is registered with the Department for Promotion of Industry and Internal Trade (DPIIT) as a start-up entity relating to FinTech.
Incorporated as a Company or LLP: An entity that has been incorporated as a company under the Companies Act 2013, or as a Limited Liability Partnership (LLP) under the Limited Liability Partnership Act, 2008, or a ‘Branch’ of an Indian company or LLP in IFSC.
Individual Indian Citizen: An individual who is a resident citizen of India.
Entities Regulated by Financial Regulators: An entity working directly or indirectly in the ecosystem regulated by RBI (Reserve Bank of India), SEBI (Securities and Exchange Board of India), IRDAI (Insurance Regulatory and Development Authority of India), or PFRDA (Pension Fund Regulatory and Development Authority).

Scope of the Incentive Scheme: Apart from the individual or entity-specific eligibility, the scheme specifies the scope regarding which Fintech Entities (FEs) are considered. Eligibility within the scope includes:
Participation in Authority’s Regulatory or Innovative Sandbox: FEs that are part of the Authority’s Regulatory or Innovative Sandbox.
Participation in Authority Supported Programs: FEs who participate in Authority’s supported Accelerators, Cohorts or Special Programs.
Referral from Entity with MoU or Collaboration with Authority: FEs that are referred by entity(ies) including regulatory or supervisory bodies having Memorandum of Understanding (MoU) or collaboration or special arrangement with the Authority for strengthening identified area of common interest.

The scheme is comprehensive in including a wide range of applicants, from individual entrepreneurs and startups to larger entities already in the regulatory or innovation space, all aimed at fostering innovation and growth within the FinTech sector as regulated and supported by the IFSCA.

Scope of IFSCA FinTech Incentive Scheme

The Scope of the Incentive Scheme outlined in the notification for the IFSCA FinTech Incentive Scheme 2022 is designed to provide financial support to eligible FinTech Entities (FEs) under specific conditions. Based on the information provided in the snippet, the scope of eligibility for the grants is as follows:

Participation in Regulatory Frameworks:
Eligible FEs must be part of the Authority’s Regulatory or Innovative Sandbox. These sandboxes typically provide a controlled regulatory environment within which startups can test novel products and services.

Participation in Authority-Supported Programs:
The scheme is open to FEs who participate in the Authority’s supported Accelerators, Cohorts, or Special Programs. These are programs designed to support the growth and development of startups through mentorship, education, and resources.

Referrals by Collaborating Entities:
Eligibility extends to FEs that are referred by entities, including regulatory or supervisory bodies, that have Memoranda of Understanding (MoU) or collaboration or special arrangements with the Authority. This inclusion aims to strengthen identified areas of common interest and foster a cooperative ecosystem for FinTech advancements.

Introduction IFSCA FinTech Incentive Scheme 2022

The International Financial Services Centres Authority (IFSCA) FinTech Incentive Scheme 2022 plays a pivotal role in nurturing innovation within the FinTech sector. Through financial incentives, it aims to empower start-ups and established FinTech entities (FEs) to develop groundbreaking products and services. This scheme is a cornerstone initiative designed to bolster the evolving FinTech landscape by covering a wide array of financial aspects, from product development to market penetration and sustainability.

Types of Incentives for Eligible Applicants for IFSCA FinTech Incentive

1. The FinTech Start-Up Grant

Objective and Funding

Purpose: The FinTech Start-Up Grant supports the ideation and development phase of innovative FinTech solutions.

Funding: Eligible FEs can receive up to Rs. 15 lacs, addressing expenses related to product development, manpower, and IT costs.

Focus Area

Development Stage: Emphasis is on transforming the innovative idea into a viable Minimum Viable Product (MVP).

2. Proof of Concept (PoC) Grant

Objective and Funding

Purpose: This grant is for conducting PoCs either within the domestic market or internationally. It's an opportunity to validate the feasibility and market potential of FinTech products or solutions.
Funding: Up to Rs. 50 lacs is available for eligible entities, covering manpower, IT, marketing, and prototyping costs.

Geographic Scope

Market Reach: Supports experiments both in Indian markets and globally, aiming to scale innovative FinTech solutions.

3. Sandbox Grant

Objective and Funding

Purpose: FEs are encouraged to use this grant for testing innovative products or services within a regulatory sandbox environment.
Funding: A financial support of up to Rs. 30 lacs, catering to software development, prototyping, manpower, consulting, and administrative expenses.

4. Green FinTech Grant

Objective and Funding

Purpose: Focuses on the creation of solutions that promote sustainable finance and ESG investments. This grant is directed towards innovations that contribute to environmental sustainability within the finance sector.
Funding: A substantial grant of up to Rs. 75 lacs is designated for FEs dedicated to sustainable finance initiatives.

5. Accelerator Grant

Objective and Capacity Building

Purpose: Designed to enhance the capabilities of accelerators within the IFSC, this grant supports capacity building, mentorship enhancement, and fostering investor relations.
Funding: Eligible accelerators may receive up to Rs. 10 lacs to augment their operational and strategic framework.

6. Listing Support Grant

Objective and Financial Assistance

Purpose: Aimed at domestic FEs keen on listing on stock exchanges recognized by the Authority. This grant facilitates the listing process, covering expenses related to road shows, international travel, and meeting listing criteria.
Funding: Up to Rs. 15 lacs is offered to ensure eligible FEs navigate the listing journey with adequate financial backing.

The IFSCA Fintech Scheme 2022 is announced in the Gazette of India, Part III Section 4, published on Friday, February 4, 2022. The scheme targets the following entities:

Domestic fintech firms with ambition to expand to International Financial Services Centres (IFSC) within India.
Domestic fintech firms who desire to extend their services to international regulatory sandboxes (Inter-Operable Regulatory Sandbox)(IRS).
Domestic fintech organizations that are expanding their business to IFSC via regulatory sandboxes.

The scheme will be operational for a period of three years from the date of commencement.

The IFSCA FinTech Incentive Scheme 2022 is robust in its quest to foster innovation, sustainability, and growth within the FinTech industry. By offering a diverse array of financial incentives, the scheme not only encourages the development of novel FinTech solutions but also supports the necessary steps for these innovations to reach the market and achieve scalability. The future of the FinTech landscape looks promising, with the IFSCA playing a fundamental role in its evolution.

For eligible applicants looking to leverage these incentives, a close examination and adherence to the specified terms and conditions are essential. As these incentives fuel the journey towards breakthrough innovations, the broader economy stands to benefit from the disruptions poised to redefine the FinTech sector.

Execution of the Scheme / Grant ( IFSCA FinTech Incentive )

The execution of the IFSCA FinTech Incentive Scheme 2022 unfolds through a methodically structured process, ensuring stringent scrutiny and due diligence to uphold the scheme’s integrity and its objectives. This section navigates through the Application Process, Evaluation, and Disbursement of Grants, presenting a clear roadmap for applicants aiming to leverage the scheme’s benefits.

Application Process

1. Submission of Application:

Applicants are required to submit their applications in a specified form and manner, including particular details along with necessary documents and fees as determined by the Authority.

2. Authority’s Role in Application Scrutiny:

Upon receiving an application, the Authority undertakes a meticulous examination focused on assessing eligibility, regulatory compliance including KYC-AML (Know Your Customer and Anti-Money Laundering) guidelines, disclosure norms, corporate governance standards, and other criteria as may be laid out by the Authority.

3. Evaluation Committee’s Involvement:

A crucial part of the scrutiny process entails evaluation by an Evaluation Committee, designated the task of examining the applications. This committee forms its recommendations, inclusive of comments and observations, which are subsequently submitted to the Authority for further action.

4. Issuance of Sanction Letter:

Based on the Evaluation Committee’s recommendations and if satisfied, the Authority proceeds to issue a sanction letter to the applicant. This letter delineates specific terms & conditions for the grant, mandating the FE to enter into agreements that align with the terms as stipulated by the Authority.

Disbursement of Grants

1. Milestone-Linked Disbursement:

The grant disbursement process is meticulously linked to predefined milestones tailored for each FE. These milestones are established in consultation with an Internal Committee to ensure relevance and efficacy.

2. Reimbursement Methodology:

Grants are disbursed on a ‘reimbursement’ basis, requiring FEs to submit necessary documentation such as invoices, technical reports, etc. This approach ensures that the utilization of funds is transparent and aligned with the grant's objectives.

3. Timely Release of Funds:

Emphasizing efficiency, the Authority commits to releasing the grant disbursement typically within 30 working days post-submission of all requisite documents by the FE. This expedited process underscores the scheme’s commitment to supporting FEs without unnecessary delays.

Special Considerations

Advance under Exceptional Circumstances: Though the scheme primarily operates on a reimbursement basis, it allows for consideration of advancing funds under exceptional circumstances, affording flexibility in urgent and unique situations.

If you want to understand more in details feel free to connect with Estabizz Team.

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