India's First IFSC in GIFT City: Operating International Trade Finance Services

IFSC

As one of the largest and fastest growing economies, India has been a major consumer of International financial services (IFS). The 2007 report of the committee set up by the Ministry of Finance (popularly known as the Percy Mistry Committee Report) had estimated that even under conservative assumptions, purchases by Indian households and firms of IFS will be nearly $50 billion by 2015, and could exceed $120 billion by 2025. Thus, with the objective of bringing back to India the international financial service business generated from India, and gradually emerge as an international financial services hub at the regional and global level, Government of India operationalized India’s maiden International Financial Services Centre (IFSC) at GIFT Multi Services SEZ in April 2015.

IFSCA

The International Financial Services Centres Authority Act was passed in December 2019 and the IFSCA commenced its operation as a unified regulator in October 2020. The IFSCA has been vested with the combined powers of four domestic regulators namely RBI, SEBI, IRDAI and PFRDA and has a mandate to develop and regulate financial institutions, financial services, and financial products within the IFSCs in India.

The strategic objectives of IFSCA are as follows:

To position the IFSC as a leading internationally recognized centre with trusted business and tax regulation, and judicial & dispute resolution system.
To become a gateway for global capital flows into and out of India.
To emerge as a regional/global hub for international financial services.

IFSCA - Framework for Setting up and operating International Trade Finance Services platform (‘ITFS’)

As per the IFSCA Act, 2019, IFSCA develops and regulates the financial products, financial services and financial institutions in the International Financial Services Centres (IFSCs). In this direction, IFSCA issued a framework for Setting up and operating International Trade Finance Services Platform (‘ITFS’) for providing Trade Finance Services at International Financial Services Centres (‘IFSCs’).

The framework will enable Exporters and Importers to avail various types of trade finance facilities at competitive terms, for their international trade transactions through a dedicated electronic platform viz, ITFS. This will help in their ability to convert their trade receivables into liquid funds and to obtain short term funding.

This framework will also provide an opportunity to the participants to avail trade finance facilities for trade transactions such as Export Invoice Trade Financing, Reverse Trade Financing, Bill discounting under Letter of Credit, Supply Chain Finance for Exporters, Export Credit (Packing Credit), Insurance/ Credit Guarantee, Factoring and any other eligible product, on the ITFS platform.