International Trade Financing Services Platform In GIFT City, IFSC

Global Overview:


The latter half of the 20th century witnessed significant technological advancements, including the widespread adoption of computers and telecommunications. This facilitated faster and more efficient international trade finance operations.

With increasing globalization, international trade finance became more sophisticated. Trade finance instruments such as documentary credits, bank guarantees, and trade credit insurance gained widespread use, providing risk mitigation for exporters and importers.

In recent years, there has been a growing emphasis on supply chain finance, allowing businesses to optimize working capital by improving the efficiency of payment processes. Additionally, there’s an increasing focus on incorporating sustainability principles into trade finance practices

International Trade Finance history in India:

In the post-independence era, India adopted a policy of import substitution industrialization (ISI). The focus was on developing domestic industries, and trade finance played a role in facilitating the import of machinery and technology for industrialization.
In response to the economic crisis, the Indian government introduced the New Economic Policy in 1991, which liberalized external trade and payments. This marked a significant turning point in India’s approach to international trade and finance.
The 2020s have seen a continued focus on digital transformation in trade finance. FinTech solutions, including blockchain technology, have been explored to enhance transparency, reduce fraud, and expedite trade finance processes.

Define the word “Trade Financing Unit” and “International Trade Finance Service”:

1.‘“Trade Financing Unit” refers to an invoice or a bill or any other standard trade document on the ITFS. Trade Financing Unit may be created either by the Exporter or Importer

2.‘“International Trade Finance Service” or “ITFS” refers to an electronic platform for facilitating the trade finance requirements of Exporters and Importers, through multiple Financiers


Regulatory Requirement:

1.Permissible Activities:
The parties to the ITFS shall be permitted to undertake or participate in International Trade Finance related activities which, inter-alia, includes;
  • 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 system and any other trade product 

2. Criteria for Setting up ITFS in an IFSC:

An entity desirous of setting up and operating the ITFS in an IFSC shall fulfil the following criteria. If such entity is a Bank or a Finance Company, it shall incorporate a separate company in IFSC to be set up as ITFS.
(a) Financial Criteria:
(i) The parent entity or the promoters/promoter groups of the company applying to set up a company as ITFS in an IFSC should have a minimum net worth of USD 1 million.
(ii) The company proposed to be set up as ITFS shall have minimum paid up equity capital of USD 0.2 million or equivalent in any other freely convertible currency.
(iii) The overall financial strength of the promoters/entity seeking to set up ITFS would be an important criterion of assessment and approval.
(b) Due Diligence of Promoters:
(i) The Parent or the promoters/promoter groups of such company should be domiciled and regulated or registered in jurisdiction not identified in the public statement of Financial Action Task Force as ‘High Risk Jurisdictions’ subject to a ‘Call for Action’; or from any jurisdiction/ country specified by the Government of India by an order, or by way of agreement or treaty with other sovereign governments.
(ii) IFSCA may, seek feedback about the applicant’s credentials from any regulator or statutory body, as deemed appropriate.
(c) Technological Criteria:
The ITFS should have sound technological support for its operations. As such, the ITFS shall, at the minimum, fulfil the following technological requirements:
(i) It shall provide electronic platform to all the participants;
(ii) It shall disseminate the information about bills/ invoices, discounting and quotes in real time basis, supported by a robust MIS (Management Information System) to the relevant parties;
(iii) It shall have a suitable Business Continuity Plan (BCP) including a disaster recovery site;
(iv) It shall submit to IFSCA the technical audit report /feasibility study report conducted on the platform before starting operations; and
(v) It shall have an online surveillance capability which monitors positions, prices and volumes in real time and is able to check any manipulation of the system.
3.Participants and Eligibility Criteria of the Participants in the ITFS

(i) Exporters, Importers, Financiers and Insurance/Credit Guarantee Institutions and other eligible entities will be the direct participants in the ITFS.
(ii) The entities, their promoters/promoter groups should be domiciled and regulated or registered in jurisdiction not identified in the public statement of Financial Action Task Force as ‘High Risk Jurisdictions’ subject to a ‘Call for Action’ or from any jurisdiction/ country specified by the Government of India by an order or by way of agreement or treaty with other sovereign governments.
(iii) Separate Master Agreements shall be executed amongst the participants i.e., between Financiers and ITFS, between ITFS and Exporters and between ITFS and Importers on or before entering into any transactions on ITFS.

4.On-boarding, Know Your Customer & Anti Money Laundering:

(i) On-boarding of all participants on the ITFS will be mandatory and these participants will be required to submit all KYC related documents, as specified, to the ITFS along with resolutions / documents specific to authorised personnel. Such authorised personnel would be provided with user credential for (multi-level) authorisations for ITFS. Indemnity in favour of ITFS, if required, may also be given if it is made part of the standardised on-boarding process.
(ii) KYC and other relevant documents shall be made available to the Financiers by the Importer/Exporter.
(iii) All receipts for exports and all payments for imports by companies shall be routed by Exporters and Importers through the banks from who they have availed their working capital financing, for facilitating reporting to their respective regulators as required under the relevant legal framework.
5.Currency for Conduct of Business:
The operations on ITFS shall be conducted only in a freely convertible foreign currency.
6.Submission of Report/ Information:
The ITFS shall furnish the following reports/information to the IFSCA within 30 days from the date of finalization of its annual financial statement 

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