On August 29, 2025, the International Financial Services Centres Authority (“IFSCA”) issued a press release focusing on the enablers for trade finance in the International Financial Services Centre (“IFSC”) (“Press Release”).[1]
Trade finance, critical to cross-border commerce, supports approximately 80% (Eighty Percent) of global trade. Amidst a widening global trade finance gap, India is positioning its IFSC in GIFT City as a pivotal hub for trade finance. This Press Release outlined the key regulatory developments and institutional enablers introduced by the IFSCA to facilitate trade finance activities.
I. Regulatory Frameworks and Institutional Enablers
Under the regulatory framework established by IFSCA, both Indian and foreign banks are permitted to establish IFSC Banking Units (“IBUs”) in branch form within GIFT IFSC. These IBUs are authorized to offer a wide range of trade finance services, including trade credit, factoring, forfaiting, and multicurrency syndicated loans, thereby playing a critical role in facilitating cross-border trade. In a significant development, the Reserve Bank of India (RBI) has permitted Indian exporters to maintain foreign currency accounts with overseas banks, and IBUs are now actively supporting the facilitation of such accounts and delivering customized financing solutions tailored to exporters’ needs. Reflecting their growing importance, the total outstanding trade finance disbursed by IBUs in GIFT IFSC stood at USD 13.79 Billion (Thirteen Point Seven Nine United States Dollars) as of June 2025.
II. Finance Companies under IFSCA (Finance Company) Regulations, 2021
Entities engaged in trade finance activities within GIFT IFSC may be registered under the IFSCA (Finance Company) Regulations, 2021 and/or the Factoring Regulation Act, 2011. These finance companies are permitted to undertake a range of financial services, including lending, factoring, forfaiting, and other trade finance-related offerings. In 2024, the IFSCA introduced the Registration of Factors and Registration of Assignment of Receivables Regulations, aimed at strengthening the legal framework for the assignment of receivables and enhancing enforceability in factoring transactions. As of F.Y. 2024-25, 4 (Four) finance companies, including a subsidiary of EXIM Bank of India, are operational in GIFT IFSC, collectively handling trade finance volumes of approximately USD 9.38 million, (Nine Point Three Eight United States Dollars) with continued growth projected.
III. International Trade Financing Services (“ITFS”) Platforms
Licensed under the IFSCA’s regulatory framework, ITFS platforms are fully digital entities designed to facilitate a broad range of trade finance activities, including factoring, forfaiting, bill discounting, and supply chain finance. These platforms promote efficiency in trade financing by enabling transparent price discovery through competitive bidding and facilitating access to a wider pool of international capital. As of now, 4 (four) ITFS entities are operational within GIFT IFSC. They are also permitted to interconnect with other electronic platforms and market infrastructures, both domestic and international, to enhance transaction efficiency and enable secondary market operations. During FY 2024-25, the trade finance volumes facilitated through ITFS platforms reached USD 29.79 million (Twenty Nine Point Seven Nine United States Dollars), reflecting a growing trend in digital trade finance adoption.
IV. International Integration
IFSCA is in advanced discussions with Factors Chain International (FCI) to integrate IFSC entities with global factoring and receivables finance networks.
V. Sustainable Trade Finance Mandate
All lending institutions in IFSC must allocate at least 5% (Five Percent) of their previous year’s outstanding loans towards sustainable/green trade finance. This aligns with India’s ESG commitments and promotes sustainable global supply chains.
VI. Capital Raising through Bond Listings
Recognized stock exchanges in IFSC can list foreign currency and INR-denominated bonds under IFSCA regulations. Non-resident investors benefit from a concessional 9% (Nine Percent) withholding tax on interest income. This framework significantly improves post-tax yield for international investors.
VII. Insurance and Risk Mitigation
IFSC Insurance Offices (“IIOs”) are permitted to offer trade credit and political risk insurance. The coverage includes: Credit risk, Political risk, Non-acceptance risk, Re-shipment and re-import risks. IIOs provide risk assessment and advisory services to exporters.
[1]https://ifsca.gov.in/CommonDirect/GetFileView?id=21626bde60601ef44a0ed022019c8d2f&fileName=Press_Release___Approved_by_Chairperson_V2_0_20250830_0946.pdf