IFSCA Extends Timeline for Appointment of Custodian under FM Regulations, 2025

Fund management entities (FMEs) are required to appoint independent custodians to provide custodial services for schemes such as retail schemes, open ended restricted schemes, and all schemes with assets under management above USD 700 Million. Under the IFSCA (Fund Management) Regulations, 2025 (FM Regulations), the custodian is required to be based in International Financial Services Centres (IFSC).

12 months transition period was provided to schemes that had existing agreements with non-IFSC based custodians to appoint a custodian based in IFSC. However, in view of the difficulties expressed by FMEs in meeting this requirement, International Financial Services Centres Authority (IFSCA), has granted an additional 6 months extension from May 24, 2025. Extension has only been granted for the following category of schemes:

• schemes taken on record after the FM Regulations came into effect (i.e February 19, 2025); and
• schemes taken on record before February 19, 2025, but which did not have custodian agreements in place as of that date

During the 6 months extension, FMEs may appoint independent custodians in India or any foreign jurisdiction regulated by their respective financial sector regulator.

Conclusion:

This extension reflects the IFSCA’s approach to acknowledging the practical challenges faced by FMEs while also maintaining its commitment to the eventual implementation of the custodian requirements.