In July 2021, the International Financial Services Centres Authority (IFSCA) issued a framework for setting up and operating an ‘International Trade Finance Services’ (ITFS) platform to provide trade finance services at International Financial Services Centres (IFSCs).
- ITFS is an electronic platform for facilitating the trade finance requirements of Exporters and Importers, through multiple Financiers.
Key points about the Framework:
i.Applicability: The framework is applicable to all entities that are seeking permission to set up ITFS in an IFSC.
ii.The framework would enable the Exporters and Importers to avail various types of trade finance facilities for their international trade transactions through ITFS, and it would support them to convert their trade receivables into liquid funds and to obtain short term funding for payments for import of goods/services.
iii.Through the framework the Exporters and Importers could use the 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, and Factoring on the ITFS platform.
iv.Financial Criteria for Setting up ITFS in an IFSC:
- The company (parent entity/ the promoters/promoter groups) that is applying to set up ITFS in an IFSC should have a minimum net worth of USD 1 million.
- It should also have a minimum paid-up equity capital of USD2 million or equivalent.
v.The operations on ITFS should be conducted only in a freely convertible foreign currency.
vi.Participants: Exporters, Importers, Financiers and Insurance/Credit Guarantee Institutions will be the direct participants in the ITFS.
Note – The frameworks are formed under the exercise of the powers conferred by Section 3 of IFSCA Act, 2019, that empowered IFSCA to make credit arrangements viz, Trade Financing Services for carrying on financial services for the financial products that are permitted under the IFSCA Act.
Recent Related News:
IFSCA has constituted a committee under the chairmanship of Vandana Aggarwal, former Senior Economic Advisor, Government of India, to examine global best practices in ship financing and leasing, identify opportunities and devise a roadmap to enable such activities from GIFT (Gujarat International Finance Tec) IFSC.
About International Financial Services Centres Authority (IFSCA):
Establishment – April 27, 2020, under IFSCA Act, 2019
Headquarters – GIFT City, Gandhinagar, Gujarat
Chairperson – Injeti Srinivas