The International Trade Financing Services (ITFS) platform is a pioneering initiative that aims to revolutionize global trade by providing digital access to trade finance services for exporters and importers at competitive rates. These platforms are the first regulated entities of their kind, utilizing a bidding mechanism to offer services like factoring, forfaiting, bill discounting, and supply chain financing. The core purpose behind establishing ITFS platforms in International Financial Services Centres (IFSC) is to bridge the financing gap that exporters and importers face, both in India and globally.
Key Changes in the Revised ITFS Guidelines
- Eligibility Criteria Simplified
One of the major updates is the streamlining of eligibility requirements. The new guidelines eliminate the earlier emphasis on the parent company’s net worth as a qualification criterion. Instead, applicants are now required to meet more specific financial, technological, and general criteria to qualify for setting up an ITFS platform in the IFSC. This change is expected to increase the number of eligible applicants and bring more innovation to the space.
- On-Tap Registration Process
The revised guidelines introduce an on-tap registration process, allowing entities to apply for registration at any time, without the constraints of a closed application window. The procedure for provisional registration, refusal, revocation, or surrender of registration has also been clarified. This update aims to provide greater flexibility and encourage more entities to enter the trade finance market in IFSC.
- Expansion of Permissible Activities
The revised guidelines significantly broaden the scope of permissible activities on the ITFS platforms. In addition to the original services, ITFS platforms are now allowed to facilitate secondary market transactions of trade finance units, enhancing liquidity. Furthermore, these platforms can act as payment system operators, facilitating the clearing and settlement of funds. This new provision is particularly important for the seamless flow of transactions and fostering trust among participants.
- Inclusion of Payment Service Providers
The scope of eligible participants has been expanded to include not only financiers, exporters, and importers, but also payment service providers. This expansion allows easier access for participants to facilitate currency exchange and make payments in their local currencies in a more cost-effective and time-efficient manner. The inclusion of payment service providers is expected to make the platforms more accessible to a global audience.
- Broader Scope for Eligible Financiers
One of the most notable updates is the expansion of the types of financiers allowed to participate on ITFS platforms. While the original guidelines permitted only banking units and finance companies licensed or regulated by IFSCA, the revised guidelines now include factors registered under the Factoring Registration Act, 2011, as well as finance companies registered in IFSC and authorized by the Authority. Additionally, other financiers may now join the platform, subject to meeting certain conditions, such as operating in a Financial Action Task Force (FATF)-compliant jurisdiction and managing assets of at least USD 5 million. This broader definition of financiers opens the platform to a wider range of players in the global trade finance ecosystem.
Conclusion
The revised ITFS guidelines mark a critical step forward in strengthening India’s role as a hub for global trade finance. By simplifying eligibility criteria, expanding permissible activities, and allowing greater participation from various financial entities, these guidelines not only make the ITFS platforms more inclusive but also ensure that they remain competitive and efficient in supporting global trade. These changes promise to provide exporters and importers with better access to capital, at more competitive rates, and with enhanced flexibility—contributing to the overall growth of international trade and finance.
