In December 2024, the International Financial Services Centres Authority (IFSCA) has released the revised framework for the setting up and operating of International Trade Financing Services (ITFS) platforms in Gujarat International Finance Tec-City- International Financial Services Centre (GIFT-IFSC), Gandhinagar (Gujarat).
- This move of allowing ITFS to operate in IFSC will help in bridging the financing gap for exporters and importers both in India and globally.
- The new framework has rationalized the net worth requirements and allowed the overseas companies to factor the receivables.
Key Changes:
i.On-Tap Registration Process: The new framework has introduced a procedure for grant of provisional registration, process involved in refusal, revocation or surrender of registration. Also, the process of registration for eligible entities can be done through an “on-tap” basis.
ii.Permissible Activities: It has also expanded the scope of permissible activities which will now include secondary market transactions of trade finance units on ITFS platforms, improving liquidity on the platform.
- In addition to it, ITFS platforms can now provide clearing and settlement of funds by registering themselves as payment system operators under the IFSCA (Payment and Settlement Systems) Regulations, 2024.
iii.Eligible Participants: In addition to previous list of eligible participants like: financiers, exporters, importers, insurance companies, the list will now includes payment service providers, which will enable easier access for participants to provide currency exchange and receive payments in their local currency in a time-bound and cost-effective manner.
iv.Expanding the scope of financiers: As per the previous guidelines, the list of eligible financiers include: banking units in IFSC or finance companies or units licensed, regulated, or registered by IFSCA or other financial sector regulators, either in India or abroad.
- Now, the revised framework has expanded the scope of eligible financiers, by including factors registered under the Factoring Registration Act, 2011, and finance companies/units registered in IFSC allowed by the authority to undertake lending or factoring activities.
- IFSCA has clarified that though the list of financiers eligible to participate on the platform has been expanded, it is ensured these financiers are incorporated in a Financial Action Task Force (FATF) compliant jurisdiction and they have requisite experience of managing assets worth USD 5 million.
v.Bidding Process for TFUs: It has clarified that the bidding of Trade Finance Units (TFUs) can be done either on an invoice-by-invoice basis or as one-time bid for the whole turnover.
vi.Setting up of compliant handling and grievance redressal: The revised framework has mandated the ITFS operator to set up a compliant handling and grievance redressal mechanism to address complaints of its participants.
About ITFS:
i.These are the 1st-of-its-kind regulated platforms which provide access to trade finance services digitally to international exporters and importers at competitive prices through a bidding mechanism.
ii.In July 2021, the IFSCA had 1st issued he guidelines related to ITFS under which 4 entities established their respective trade finance platforms like: RXIL Global IFSC Ltd., Vayana IFSC Pvt. Ltd., Mynd Pvt Ltd, and Kredx Ventures IFSC Pvt Ltd.
About International Financial Services Centres Authority(IFSCA):
It is the unified regulator for the development and regulation of financial products, financial services and financial institutions such as GIFT-IFSC, in India. It was established under the International Financial Services Authority (IFSCA) Act, 2019.
Chairman– K. Rajaraman
Headquarters– GIFT City,Gandhinagar, Gujarat
Established– 2020
