Strengthening Trade Finance: Revised ITFS Guidelines & Compliance Updates

Transforming Financial Services in IFSC

overview

  • The ITFS is a digital platform in GIFT City IFSC that enables trade finance activities like factoring, bill discounting, and reverse factoring.
  • Participants on the ITFS include exporters, importers, financiers, insurers, credit guarantee institutions, and payment service providers (PSPs).
  • The revised IFSCA framework establishes clear rules for ITFS registration, operations, tech, risk, outsourcing, and grievance redressal, ensuring transparency and efficiency.

Key Updates on Eligibility & Operations

  • The revised framework introduces stricter eligibility norms for financiers participating on the ITFS platform.
  • Financiers must have at least USD 5 million in loans or AUM, USD 5 million in capital, credit recovery capability, and be a registered factoring entity.
  • Additionally, neither the financier nor its major shareholders (holding over 10%) can be from jurisdictions classified by FATF as “High Risk – subject to call for action.”
  • A new explanation also clarifies that AUM refers to the total value of all financial assets managed or owned. These changes mark a significant revamp of Clause 12(2) of the ITFS Guidelines.

Strengthened Governance & Tech Rules

  • The revised ITFS framework mandates fit and proper criteria for key personnel, a governance policy aligned with IFSCA norms, and strong risk and compliance systems.
  • On the technology front, operators are required to conduct annual IT/IS audits and additional audits before any major platform updates.
  • The platform must enable real-time bidding, have disaster recovery and MIS systems, use secure, scalable tech, and store data in retrievable formats.

CONCLUSION

  • The ITFS framework amendments improve clarity with precise definitions like AUM, eliminating interpretation gaps.
  • Second, they introduce flexibility by allowing outsourced debt recovery capabilities, reducing operational constraints for financiers.
  • Third, the stricter FATF and jurisdictional requirements enhance robustness, ensuring only credible participants operate on the platform.
  • Finally, the updates reinforce compliance, bringing ITFS operations in closer alignment with international anti-money laundering standards.

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