An IFSC Banking Unit, usually shortened to IBU, is a branch that a bank sets up inside GIFT City to do international banking business in foreign currency. It sits in India geographically, but for regulatory and currency purposes it operates much like an offshore branch.
What it is, in simple words
A banking unit is not a new bank. It is a separately licensed branch of an existing bank, ring-fenced from the bank’s domestic books, keeping its accounts in a foreign currency and serving mainly non-resident clients and permitted Indian clients.
Who typically sets one up
- Indian public and private sector banks building an international lending and trade desk
- Foreign banks that want an India-adjacent, foreign-currency presence
- Banks consolidating offshore loan books and treasury activity closer to their India teams
What a banking unit is allowed to do
Permitted activity is broad but defined by the regulator rather than chosen freely. In practice, banking units are used for foreign-currency lending, trade finance, treasury and derivatives activity, deposits from permitted clients, and support for external commercial borrowings and bond issues by Indian corporates.
Why banks choose GIFT City for this
- One regulator — the International Financial Services Centres Authority (IFSCA) — instead of several
- Business in foreign currency, so clients are billed and funded in the currency they use
- Access to Indian corporate relationships and Indian talent from the same location
- A concessional tax framework designed for IFSC units
Broad requirements at a glance
- An existing licensed bank as the parent; the unit itself is a branch, not a standalone company
- Licence from IFSCA under the IFSCA (Banking) Regulations, 2020
- Committed capital support from the parent, along with fit-and-proper management
- Ongoing conduct, prudential and reporting obligations set out in the IFSCA Banking Handbook
- A registered unit within the GIFT SEZ, with the accompanying SEZ approvals
Questions people usually ask
Can an IBU take rupee deposits? No. A banking unit operates in foreign currency; rupee business stays with the domestic branches.
Can it serve Indian residents? Only to the extent permitted by the regulator, and generally for foreign-currency purposes rather than everyday domestic banking.
Is a new company required? No. The unit is established as a branch of the parent bank, which keeps the structure simpler than a subsidiary.
How is it different from an offshore branch elsewhere? The commercial logic is similar, but the unit stays within India’s legal system, with Indian courts, Indian professionals and Indian oversight, which many boards find easier to govern.
Where to go next
If you are weighing whether a banking unit is the right structure, our eligibility and fit check walks through activity, legal form and regulator in a few minutes. You can also read the detailed banking entity guide or see who already operates in the IFSC in the entity directory.
