Revising guidelines for setting up and operating International Trade Financing Services (ITFS) platforms in GIFT City, the International Financial Services Centres Authority (IFSCA) has rationalised the net worth requirements and broadened the scope of those who can conduct trade finance activities.

“We have notified the revised framework for the ITFS platform. We already have four international trade financing platforms. We have now rationalised the net worth requirements and have allowed overseas companies to factor the receivables. Currently, only local banks are doing it. Now onwards, foreign finance companies will also participate,” K Rajaraman, Chairperson of IFSCA told businessline. 

Regulated platforms

The ITFS platforms are the first-of-its kind regulated platforms which facilitate access to trade finance services digitally to global exporters and importers at competitive prices through a bidding mechanism. These trade finance services inter-alia include factoring, forfaiting, bill discounting and supply chain financing. The IFSCA had first issued the ITFS guidelines in July 2021 under which four entities established their trade finance platforms including RXIL Global IFSC Ltd, Vayana IFSC Pvt Ltd, Mynd IFSC Pvt Ltd and Kredx Ventures IFSC Pvt Ltd.

“If you want to see Indian exports touch USD 2 trillion by 2030, a lot of finance will be required for SMEs. These trade finance platforms will add to that function,” he added. The overarching principle of allowing ITFS in the International Financial Services Centre (IFSC) is to help bridge the financing gap for exporters and importers both in India and globally. 

The earlier guidelines allowed financiers to be either 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.The revised guidelines broaden the scope of eligible financiers, by including factors registered under the Factoring Registration Act, 2011, and finance companies or units registered in IFSC permitted by the Authority to undertake lending or factoring activities, the IFSCA said in an official statement. 

Eligible participants

The list of eligible participants, in addition to financiers, exporters, importers, insurance entities. will now also include payment service providers, enabling easier access for participants to facilitate currency exchange and receive payments in their local currency in a timely and cost-effective manner. 

Though the list of financiers eligible to participate on the platform has been enlarged, it is ensured that these financiers are incorporated in a FATF compliant jurisdiction and they have the requisite experience in financing or having managed assets to the tune of USD 5 million. The financing entity shall have a minimum capital of USD 5 million, IFSCA said in its statement.

The scope of permissible activities has also been expanded to include secondary market transaction trade finance units on ITFS platforms, enhancing liquidity on the platform. Additionally, ITFS platforms can now facilitate clearing and settlement of funds registering themselves as payment system operators under the IFSCA (Payment and Settlement Systems) Regulations, 2024, the statement added.