Regulatory updates to the Master Direction on Risk Management and Inter-Bank Dealings now apply to banks operating IFSC Banking Units, strengthening governance for offshore transactions.
Enhanced Oversight for IFSC Banking Units
On October 12, 2026, the RBI issued a circular updating the Master Direction on Risk Management and Inter-Bank Dealings, with specific application to Authorised Dealer Category-I banks operating International Financial Services Centres (IFSC) Banking Units (IBUs). The amendment, under Para 2.3(iii) of Section I, Part A, mandates stricter internal controls and oversight mechanisms for inter-bank transactions involving IBUs.
Given the cross-jurisdictional nature of IBU operations, the directive reinforces the need for robust risk assessment protocols, particularly in foreign currency funding and derivative exposures. It mandates that AD-I banks ensure adherence to consolidated risk limits and regulatory reporting timelines, even for offshore transactions.
Practitioners advising banks with IFSC operations must ensure compliance with these enhanced governance standards. The move underscores the RBI’s intent to prevent regulatory arbitrage and ensure that IBUs, while operating under a special regime, remain anchored to sound risk management principles.
