India’s Securitisation Gateway

**Aadit Sharma & Madhvendra Jha

Introduction

Cross-border securitisation is a financial mechanism through which assets (like loans, receivables, or mortgages) from one country are bundled, securitised and sold as investment products to foreign investors, typically via Special Purpose Vehicle (“SPV”) set up in a different jurisdiction. Globally, securitisation has evolved into a $13 trillion market, driven by investors seeking higher yields in fixed-income instruments. A significant portion of this market is driven by cross-border securitisation, which enables originators to access foreign capital and reduce funding costs

Against this backdrop, India’s securitisation market is undergoing a transformative journey. Over the past five years, India has demonstrated remarkable growth in its securitisation market, registering a compound annual growth rate (“CAGR”) of around 30%. According to ICRA data, the market reached an all-time high of ₹2.35 lakh crore (approx. USD 26.7 billion) in FY2025. Despite this progress, the sector accounts for only 0.04% of India’s GDP, in stark contrast to approximately 9.6% in the United States, indicating that the Indian securitisation market remains in its early stages and underdeveloped compared to other emerging economies.

Thus, through this article we will critically examine GIFT City’s potential to become India’s gateway for cross-border structured finance. Firstly, it will set the premise by explaining the importance of GIFT City. Secondly, it reviews the regulatory innovations, outlining the challenges ahead, providing a comparative analysis with foreign jurisdictions. Lastly, proposes a roadmap to position India as a major player in the global securitisation landscape.

A Wonder that is GIFT City: Parameters & Potential

While India’s domestic growth is promising, global financial centres like Singapore, Dubai and Hong Kong have already emerged as securitisation hubs in the region by offering tax neutrality, flexible regulatory regimes and strong investor protection. These attributes collectively attract global institutional capital. In a similar bid to establish a competitive financial ecosystem, India has launched the Gujarat International Finance Tec-City (“GIFT City”), its first International Financial Services Centre (“IFSC”). GIFT City addresses the long-standing fragmentation in India’s regulatory architecture by bringing together powers previously split across multiple regulatory bodies (such as RBI, SEBI and IRDAI) under a single unified authority: the International Financial Services Centres Authority (“IFSCA”).

GIFT City is rapidly establishing itself as a rising force in the global financial ecosystem, securing the 43rd position in the Global Financial Centres Index (2024) . Reflecting this growing prominence, British International Investment and Calvert Impact committed $40 million this year to the Vivriti India Retail Assets Fund (or VIRAF), an asset-backed securitisation (“ABS”) fund based in GIFT City. With existing backers such as M&G Catalyst and the International Finance Corporation, the total fund now approaches $150 million, channeling capital into small-ticket loans for Indian SMEs.

IFSCA’s Strategic Enablers for Financial Innovation

IFSCA has introduced a suite of regulatory measures which fosters securitisation innovation through its regulatory sandbox. As a ring-fenced jurisdiction, it offers offshore benefits such as zero capital gains tax, a 10-year tax holiday and no stamp duty; it mirrors other financial hubs like Luxembourg and Dubai. These features promote SPV creation, while attracting foreign funds to support the development of a robust international debt and structured finance market.

The IFSCA (Fund Management) Regulations (2022) mandates that SPVs would get established through Fund Management Entities (“FMEs”) within the IFSC, offering flexibility and transparency in structuring deals. These SPVs facilitate co-investment opportunities without needing a SEBI license, thus reducing compliance burdens while accelerating capital deployment. 

IFSC Exchanges (India INX and NSE IX) provide internationally aligned listing platforms for debt and structured finance instruments, supported by dual-listing arrangements with global exchanges such as the Luxembourg Stock Exchange. Some key issuances were NTPC’s USD 6 Billion MTN Programme and Axis Bank’s USD 600 million AT1 notes. It enhances liquidity and cross-border capital raising for securitised products.

GIFT City has created a conducive environment for securitisation-driven funds structured as Category III AIFs. These funds based on securitisation pools (such as asset-backed or mortgage-backed securities) address challenges faced by international investors income taxation at the fund level only, making them highly attractive to offshore investors. The framework for Family Investment Funds (“FIFs”) further broadens the offshore investor base by enabling Indian HNIs and family offices to invest in global securitised assets through a regulated and tax-efficient platform.

Synthetic securitisation involves transferring the credit risk of a portfolio using credit derivatives or guarantees while keeping the exposure on the lender’s balance sheet. RBI has prohibited the use of synthetic securitisations as directed under Chapter II, Part A – 6(c) of Master Direction issued in 2021. Whereas IFSCA permits banks in GIFT City to engage in synthetic securitisation, aligning Indian practices with global Basel III norms. Synthetic Securitisation holds a significant role in the global structured finance market, with cost-effective deals enhancing capital management flexibility efficiently.

IFSCA released its Consultation Paper on Tokenization of Real-World Assets in February 2025, proposing India’s first comprehensive framework governing digital tokens, market infrastructure and investor protection. Tokenization involves converting physical or financial assets into digital tokens, enabling fractional ownership and broader investment access through blockchain platforms. This initiative positions India as an early mover in regulating for both tangible and intangible assets. It enhances liquidity, improves market accessibility and holds transformative potential for structured finance.

Comparative Analysis

Hong Kong is uniquely positioned to serve as a cross-border securitisation bridge between Mainland China and international capital markets, leveraging its common-law framework, international financial infrastructure, and existing connectivity mechanisms such as Bond Connect. A proposed model envisages a Hong Kong-based SPV acquiring Mainland ABS through an upgraded “Bond Connect 2.0” and issuing RMB or foreign currency denominated securities to international investors. This structure could broaden the Mainland investor base and financing channels, while supporting RMB internationalisation. However, its development requires a robust SPV regime, clearer tax treatment, streamlined foreign-debt registration, and regulatory reforms to facilitate efficient cross-border issuance.

Luxembourg has developed a sophisticated legal architecture for cross-border securitisation, combining domestic structuring flexibility with harmonised EU regulation. The regime operates principally through two layers: the Luxembourg Law of Securitisation, as amended and EU Regulation 2017/2402 (“EU Securitisation Regulation”), supplemented by rules on financial collateral, prospectuses, MiFID II, EMIR and prudential regulation. This framework is particularly conducive to cross-border transactions because Luxembourg SPEs can acquire risks relating to a broad range of foreign assets, while the governing law of the asset transfer and its perfection may generally follow the jurisdiction where the assets or underlying debtors are located; indeed, most Luxembourg securitisations involve assets situated abroad.

Legal certainty is reinforced through bankruptcy-remote SPEs and statutory recognition of limited-recourse, non-petition and subordination arrangements, insulating securitised assets and cash flows from the insolvency risks of transaction parties. At the regulatory level, EU rules impose 5% risk retention, transparency, investor due-diligence and STS requirements, supervised in Luxembourg principally by the CSSF and CAA. This combination of conflict-of-laws flexibility, insolvency protection and EU-wide regulatory harmonisation has made Luxembourg an attractive jurisdiction for SPE establishment and a significant legal hub connecting foreign originators, assets and institutional investors in cross-border securitisation transactions. 

Hurdles & the Challenges to GIFT City-Led Securitisation

Tax-related hurdles are significant. The absence of explicit tax provisions for securitisation structures means SPVs may be taxed as representative entities and payments to SPVs often attract Tax Deducted at Source or TDS  thereby blocking cash flows and reducing investor yield. Stamp duty varies state by state on asset transfer instruments with no uniform cap for securitisation. This may add additional costs to every deal which makes it expensive compared to offshore hubs. 

The regulatory framework governing securitisation in India remains divided between multiple regulators. The RBI oversees the creation and transfer of receivables, while SEBI regulates the issuance and trading of securitised debt instruments, creating overlapping compliance obligations and transactional uncertainty. Although IFSCA has centralised financial-sector regulation within GIFT City, greater harmonisation remains necessary for cross-border structured finance. Until the introduction of the Variable Capital Company (“VCC”) regime in June 2026, GIFT City lacked a globally recognised fund vehicle with segregated sub-funds, reducing its competitiveness against established jurisdictions like Singapore.

 There are various operational constraints that continue to affect the growth of GIFT City-based investment products. Unlike domestic investment platforms, participation in GIFT-based vehicles often requires compliance with the Liberalised Remittance Scheme (“LRS”) and additional procedural formalities. It increases transaction costs and limits retail participation. Regulatory requirements that are difficult to implement in practice may limit the effectiveness of otherwise favourable policy measures.

The Central Board of Direct Taxes (“CBDT”) January 2025 notification was expected to provide much-needed tax certainty for retail schemes in GIFT City. However, practical concerns remain. While the notification prescribes investment limits for unlisted securities and associate entities, it does not address breaches caused by market movements or changes in investor numbers. This creates uncertainty for fund managers and may have contributed to the slow growth of retail schemes.The fact that only eight retail schemes have been registered compared to 123 non-retail schemes suggests that regulatory clarity remains a significant concern. 

Investor onboarding remains another area of concern. Foreign investors and NRIs must submit original applications with jurisdiction-specific attestation, increasing time and cost through physical documentation. This limits participation largely to family offices and institutional investors. Though Video KYC is available for NRIs. It does not eliminate the physical-form requirement and remains unavailable for foreign nationals from many jurisdictions, creating gaps in digital onboarding. Consequently cross-border flows and asset transfers between offshore SPVs and onshore asset pools continue to face operational friction 

Despite significant regulatory reforms, GIFT City’s emergence as a global securitisation hub remains constrained by ecosystem-related challenges.  The concerns over talent availability, operational infrastructure, and ecosystem maturity continue to hinder its growth. These factors coupled with onboarding requirements and limited retail participation, increase transaction costs and affect fundraising efficiency. GIFT City also continues to compete with established financial centres such as Singapore, Luxembourg, and Hong Kong, which possess deeper institutional ecosystems and more mature structured finance markets. 

Way Forward and Conclusion

The key challenge for GIFT City is no longer the absence of policy support but the effective implementation of existing reforms. Greater regulatory coordination, simpler operational processes and deeper market infrastructure will be critical for unlocking the full potential of securitisation activities within the IFSC.

A significant step towards reducing regulatory complexity was taken through IFSCA’s 2026 framework permitting unified registration for multiple capital market activities under a single approval. It  allows eligible intermediaries including FME’s to undertake a broader range of activities without obtaining separate registrations. The framework simplifies regulatory compliance and lowers operational friction. The reform reflects a shift towards a more integrated supervisory approach within GIFT City and addresses one of the practical concerns that has historically increased transaction costs.

IFSCA’s introduction of Video KYC for NRIs is a positive step towards reducing onboarding frictions in GIFT City. However, it remains limited to specified jurisdictions and excludes foreign nationals, while the continued requirement of physically attested documents prevents fully digital onboarding. Expanding Video KYC across all jurisdictions, extending it to foreign investors, and adopting paperless verification would streamline onboarding and strengthen GIFT City’s competitiveness as an international financial centre.

The development of GIFT City’s securitisation market will also require a deeper institutional ecosystem. The International Financial Services Centres Authority (Pension Fund) Regulations, 2026, broaden the pool of long-term capital available within the IFSC, while IFSCA’s certification requirements for personnel of FME’s seek to strengthen professional expertise and governance standards.

Together these measures can enhance both market depth and investor confidence factors which are critical to the growth of a sustainable securitisation market.

**Aadit Sharma & Madhvendra Jha are third-Year Students at the Dr. Ram Manohar Lohiya National Law University, Lucknow.

**Disclaimer: The views expressed in this blog do not necessarily align with the views of the Vidhi Centre for Legal Policy.