[Image omitted. See the official document.]
CIRCULAR
IFSCA-FCR0FCR/3/2023-Banking/2024-25/
December 23, 2024
To,
All ITFS Operators in IFSC/participants of ITFS Platform
Guidelines on setting up and operation of International Trade Finance Service Platform
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The revised guidelines on setting up and operation of International Trade Finance Services Platform issued under the IFSCA (Finance Company Regulations), 2021 is placed as Annex A to this circular.
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These guidelines shall come in to force with immediate effect.
Yours Sincerely,
Supriyo Bhattacharjee
Head Department of Banking
Annex A
Guidelines on setting up and operation of International Trade Finance Service Platform, 2024
In exercise of the powers sub-regulation (1) of regulation 10 of International Financial Services Centres Authority (Finance Company) Regulations, 2021, the Authority hereby issues the following guidelines.
Chapter I
PRELIMINARY
1. Short Title and Commencement:
- (1) These guidelines may be called the Guidelines on setting up and operation of International Trade Finance Service Platform, 2024 (hereafter referred to as 'guidelines') and shall come into effect from the date of their publication on the Authority’s website.
2. Applicability:
- (1) These guidelines shall apply to:
- (i) ITFS operators registered under the circular "Framework for setting up of International Trade Financing Services Platform ('ITFS') for providing Trade Finance Services at International Financial Services Centres ('IFSCs')" dated July 9, 2021;
- (ii) An entity desirous of seeking registration as an ITFS operator in IFSC, and;
- (iii) The participants in an ITFS.
3. Definitions:
- (1) In these guidelines, unless the context otherwise requires, the terms defined herein shall bear the meanings as assigned to them below, and their cognate expressions shall be construed accordingly –
- (i) "Authority" means the International Financial Services Centres Authority established under sub-section (1) of Section 4 of the International Financial Services Centres Authority Act, 2019;
- (ii) "Certificate of Registration" means a certificate granted by the Authority under sub-regulation 7 of regulation 3 of the IFSCA (Finance Company) Regulations, 2021(as amended) (hereinafter referred to as 'FC Regulations');
- (iii) "Financiers" shall include:
- (a) Factors as defined in sub-section (i) of section 2 of the Factoring Regulation Act, 2011, or;
- (b) Finance Company/ Finance Unit registered to undertake permissible activities as specified in regulations 5(1)(ii)(a) and/or 5(1)(ii)(b) of the FC Regulations, or;
- (c) Any other entity on-boarded on the ITFS platform in compliance with clause 12(2) of these guidelines for undertaking permissible activities as specified under para 11(1) of these guidelines;
- (iv) 'Financial technology (fintech)' means technologically enabled innovation in financial services that could result in new business models, applications, processes or products;
- (v) "International Trade Finance Service platform (ITFS) refers to an electronic platform for facilitating the financing of trade receivables or trade payables;
- (vi) "ITFS operator" shall mean an entity registered with the Authority to operate an ITFS under these guidelines;
- (vii) "Outsourcing" refers to an arrangement in which a service provider provides the ITFS operator with a service that may currently or potentially be performed by the ITFS operator itself and shall include availment of services by the ITFS operator from its group entities;
- (viii) "Participants" refers to participants in an ITFS and includes exporters, importers, Financiers, Insurance/Credit Guarantee Institutions, Payment Service Providers (PSP) or any other entity permitted by the Authority;
- (ix) "Payment service provider" means an entity as defined in clause (z) of sub-regulation 1 of regulation 2 of the IFSCA (Payment Services) Regulations, 2024;
- (x) "Relevant Persons" of the entity means its directors, Key Managerial Personnel and persons exercising control over that entity;
- (xi) "Reverse Factoring" refers to a method of financing where the importer makes provision for a financing arrangement wherein a supplier/exporter can choose to receive an early payment on the invoices it draws against the importer;
- (xii) "Specified foreign currency" means currencies as specified in the First Schedule to the IFSCA (Banking) Regulations, 2020 (as amended);
- (xiii) "Trade Financing Unit (TFU)" refers to an invoice or a bill or any other standard trade document, uploaded either by the Exporter or the Importer, on the ITFS;
- (2) Words and expressions used and not defined in these guidelines but defined in the International Financial Services Centres Authority Act, 2019 ("the Act") or Acts mentioned in the First Schedule to the Act or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those Acts, rules or regulations or any statutory modification or re-enactment there to, as the case may be.
CHAPTER II
SETTING UP OF AN ITFS
4. Eligibility criteria for registration:
- (1) General: An Entity desirous of setting up as an ITFS operator:
- (i) shall be set up in the form of a newly incorporated company under the Companies Act, 2013
- (ii) shall submit an application to the IFSCA in the Single Window IT System (SWITS) (https://swit.ifsca.gov.in/) for a Certificate of Registration as a Finance Company under IFSCA (Finance Company) Regulations, 2021 ;
- (iii) shall satisfy the requirement of the parent entity of the applicant having experience of at least three years in operating trading infrastructure in financial markets or operating a financial technology (fintech) platform;
- (iv) shall possess or shall be willing to invest in the necessary infrastructure in IFSC including adequate office space requirement, equipment, communication facilities and manpower to undertake the permissible activities;
- (v) shall provide necessary information for the Authority to satisfy itself that the financial position of the parent entity of the applicant is sound;
- (vi) shall provide necessary information for the Authority to satisfy itself that the applicant and relevant persons of the applicant satisfy the 'fit and proper' requirements as specified in these guidelines;
- (vii) shall inform if the parent entity of the applicant has in the past been refused registration/authorisation by the Authority and if so, the ground for such refusal;
- (viii) shall confirm that the applicant or the relevant persons of the applicant are not subject to any proceeding for breach of law in any jurisdiction.
- (2) Financial:
- (i) An Entity desirous of setting up an ITFS shall meet minimum owned fund of USD 0.2 million at all times.
- (3) Technical:
- (i) An entity desirous of setting up an ITFS shall have sound technological infrastructure to support its operations. At minimum, the entity shall specify the manner in which it aims to fulfil the following requirements:
- (a) ITFS shall be able to provide an electronic platform for all participants.
- (b) Information about bills/ invoices, discounting and quotes shall be disseminated by the ITFS in real time basis, supported by a robust management information system (MIS).
- (c) The ITFS shall have a suitable Business Continuity Plan (BCP) including a disaster recovery site.
- (d) The ITFS shall have an online surveillance capability to monitor positions, prices and volumes in real time.
Chapter III
REGISTRATION TO SET UP AN ITFS
5. Issue of provisional registration:
- (1) After considering an application submitted under para 4(1)(ii), if the Authority is of the opinion that the said application, prima facie, satisfies the conditions for granting registration, the Authority may issue a "provisional registration" letter to the Applicant and shall require the Applicant to satisfy such conditions and within such time as may be specified by the Authority before grant of registration.
- (2) Grant of registration to an Applicant who has been issued "provisional registration" shall be at the sole discretion of the Authority and the issue of "provisional registration" by the Authority shall not automatically entitle the Applicant to be granted a registration.
- (3) The Applicant shall intimate to the Authority about any change of ownership or control of the Applicant during the period when a "provisional registration" is in force.
- (4) The Authority, after receipt of intimation under the para (3) above or when it otherwise becomes aware of any change of ownership or control of the Applicant to whom a "provisional registration" has been issued, shall undertake a review of its decision of grant of "provisional registration" to the applicant. The outcome of the review undertaken shall be communicated to the Applicant.
- (5) If as a result of the review as stated in para (4) above, the Authority intends to revoke the "provisional registration" granted to the Applicant, the Authority shall provide a reasonable opportunity of hearing to the Applicant before taking a final decision in the matter.