**Executive Summary**
This press release from the International Financial Services Centres Authority (IFSCA) outlines the key enablers for trade finance within the International Financial Services Centre (IFSC) in India. It highlights the roles of IFSC Banking Units (IBUs), finance companies, the International Trade Financing Services (ITFS) platform, and sustainable/green trade finance initiatives in supporting and promoting trade finance. The press release is dated August 29, 2025, and mentions that outstanding trade finance disbursed by IBUs stood at USD 13.79 billion at the end of June 2025.
**Key Points / Main Content**
* **Role of IFSCA:**
* IFSCA is the unified regulator for financial products, services, and institutions in IFSCs in India.
* IFSCA aims to position GIFT IFSC as a hub for global trade finance.
* **IFSC Banking Units (IBUs) and Trade Finance:**
* Indian and foreign banks can establish IBUs in branch form.
* IBUs offer trade credit, factoring, and forfaiting services.
* IBUs facilitate foreign currency accounts for Indian exporters (following RBI approval).
* Exporters and importers can access risk management instruments (e.g., foreign exchange and interest rate derivatives) through IBUs.
* IBUs support syndicated lending and cross-border financing.
* **Finance Companies and Trade Finance:**
* IFSCA facilitates the setup of Finance Companies/Units for trade finance activities.
* These entities provide lending solutions, including trade finance products, factoring, and forfaiting.
* IFSCA issued regulations for the registration of factors and assignment of receivables in 2024.
* **International Trade Financing Services (ITFS) platform:**
* ITFS are digital platforms for financing global trade with services like factoring, forfaiting, supply chain finance, bill discounting, and export credit.
* They aim to promote price discovery, faster processing, and access to international capital.
* IFSCA allows ITFS to connect with other electronic platforms within and outside IFSC.
* **Sustainable and Green Trade Finance:**
* IFSCA mandates lending institutions in IFSC a target of 5% of their loan outstanding as on the previous financial year.
* This target can be met by financing towards sustainable trade finance transactions.
* **Raising Capital Through Listing of Bonds:**
* IFSCA enables Indian exporters to raise foreign capital by listing foreign currency/masala bonds on recognized stock exchanges in IFSC.
* Non-resident investors in these bonds enjoy a favorable 9% withholding tax rate.
* **Insurance and Risk Mitigation:**
* Insurance sector in IFSC offers trade credit insurance.
* IFSC Insurance Offices (IIOs) offer insurance products covering export-related risks, such as credit risk, political risk, non-acceptance risk, re-shipment, and re-import risks.
* IIOs assess market risk and advise exporters.
* **International Cooperation:**
* IFSCA is collaborating with global bodies like Factors Chain International (FCI) to integrate with international factoring networks.
**Impact Analysis**
**Stakeholder: Indian Exporters**
* **Impact:**
* Access to a wider range of trade finance instruments and solutions, including IBUs, factoring, and forfaiting.
* Ability to open and maintain foreign currency accounts with overseas banks (facilitated by IBUs).
* Improved risk management through access to foreign exchange and interest rate derivatives.
* Opportunity to raise foreign capital through listing of bonds in IFSC with favorable tax treatment for investors.
* Access to trade credit insurance for risk mitigation.
* **Action Required:**
* Explore and utilize the available trade finance solutions offered by IBUs, finance companies, and ITFS platforms.
* Assess and manage export-related risks through available insurance products.
* Consider raising capital through bond listings in IFSC.
**Stakeholder: Indian Importers**
* **Impact:**
* Access to a wider range of trade finance instruments and solutions, including IBUs, factoring, and forfaiting.
* Improved risk management through access to foreign exchange and interest rate derivatives.
* **Action Required:**
* Explore and utilize the available trade finance solutions offered by IBUs and finance companies and ITFS platforms.
**Stakeholder: Banks (Indian and Foreign)**
* **Impact:**
* Opportunity to establish IFSC Banking Units (IBUs) to offer trade finance services.
* Potential to expand lending activities and cross-border financing.
* Mandatory 5% target for financing towards sustainable trade finance transactions.
* **Action Required:**
* Evaluate the feasibility of establishing IBUs in IFSC.
* Develop trade finance products and services suitable for IFSC.
* Align lending practices with sustainable trade finance principles.
**Stakeholder: Finance Companies/Units**
* **Impact:**
* Opportunity to set up units in IFSC to undertake trade finance activities.
* **Action Required:**
* Register under the IFSCA (Finance Company) Regulations, 2021 and /or under Factoring Regulation Act, 2011, and offer trade finance products, factoring, and forfaiting services.
**Stakeholder: Investors (Especially Non-Resident Investors)**
* **Impact:**
* Favorable 9% withholding tax rate on interest income from bonds issued by Indian companies or business trusts and listed on recognized stock exchange platforms in GIFT City.
* **Action Required:**
* Consider investing in bonds issued by Indian companies or business trusts and listed on recognized stock exchange platforms in GIFT City.
**Stakeholder: Insurance Offices (IIOs) in IFSC**
* **Impact:**
* Opportunity to offer insurance products covering export related risk such as credit risk, political risk, non-acceptance risk, re-shipment and re-import risks.
* **Action Required:**
* Assess the market risk and provide advisory to exporters to mitigate potential risk.
Key Entities Referenced
International Financial Services Centres Authority (IFSCA): The unified regulator for financial products, financial services, and financial institutions in IFSCs in India, plays a key role in trade finance.
IFSC Banking Units (IBUs): Branches of Indian and foreign banks within the IFSC framework, acting as conduits for trade finance.
GIFT City: India's International Financial Services Centre (IFSC) and a hub for global trade finance activities.
IFSCA (Finance Company) Regulations, 2021: Regulations that allow Finance Companies to undertake trade finance activities within the IFSC.
Factoring Regulation Act, 2011: The Act allows Finance Companies to undertake factoring activities within the IFSC.
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PRESS RELEASE
Enablers for Trade Finance in IFSC
Trade finance is the lifeblood of cross-border commerce. Around 80 percent of all global trade
is supported by some form of trade finance instrument, such as letters of credit, supply chain
financing, invoice discounting, and receivables financing1. At the same time, according to the
Asian Development Bank (ADB), the global trade finance gap has widened from USD 1.5
trillion in 2018 to over USD 2 trillion2.
For India, trade continues to play a strategic role in driving industrial upgradation, innovation,
and employment generation. In FY 2024-25, India’s exports stood at USD 824.9 billion, and
the Hon’ble Commerce and Industry Minister has set an ambitious target of USD 2 trillion in
annual exports by 2030. Achieving this goal will require not only enhanced competitiveness in
goods and services but also accelerated access to trade finance, encompassing credit, risk
mitigation instruments, and other financial services.
Role of IFSC and IFSCA
The International Financial Services Centres Authority (IFSCA), as the unified regulator for
financial products, financial services, and financial institutions in IFSCs in India, has
recognized the crucial role of trade finance in India’s economic trajectory. In GIFT IFSC, IFSCA
has taken a series of enabling measures to position the centre as a hub for global trade
finance.
IFSC Banking Units and Trade Finance
Under the IFSC framework, both Indian and foreign banks can set up IFSC Banking Units
(IBUs) in branch form, which act as important conduits for trade finance by offering trade credit,
factoring, and forfaiting services. Following the recent RBI approval permitting Indian
exporters to open and maintain foreign currency accounts with overseas banks, IBUs are
expected to play a pivotal role in facilitating such accounts and delivering customized financing
solutions to Indian exporters
In addition, exporters and importers can access a wide range of risk management instruments
through IBUs, such as foreign exchange and interest rate derivatives, which enable them to
hedge exposures and ensure greater predictability in cash flows.
Further, IBUs support syndicated lending and cross-border financing by extending
multicurrency trade loans and connecting clients to global pools of capital.
1 https://www.pib.gov.in/PressReleasePage.aspx?PRID=1911117
2 ADB Brief – Trade Finance Gaps, Growth, and Jobs Survey 2023
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PRESS RELEASE
Outstanding trade finance disbursed by IBUs in GIFT stood at USD 13.79 billion at the end of
June 2025.
Finance Companies and Trade Finance
Beyond banks, IFSCA has also facilitated the setting up of Finance Companies or Units, (akin
to NBFCs in India) to undertake trade finance activities. Registered under the IFSCA (Finance
Company) Regulations, 2021 and /or under Factoring Regulation Act, 2011, such entities
provide lending solutions, including trade finance products, as well as services like factoring
and forfaiting.
IFSCA has also issued the ‘IFSCA (Registration of Factors and Registration of Assignment of
Receivables) Regulations, 2024’, thereby creating a comprehensive legal framework for
assignment of receivables and strengthening the overall trade finance ecosystem.
Currently, four finance companies, including subsidiary of EXIM Bank India, are registered to
carry out factoring and forfaiting activities. The trade finance volumes handled by these finance
companies amounted to approximately USD 9.38 million in FY 2024-25, with the trend
indicating steady growth in the current year.
Trade Finance through International Trade Financing Services (ITFS) platform
ITFS are fully digital platforms to finance global trade by offering a range of services, including
factoring, forfaiting, supply chain finance, bill discounting, and export credit. The core aim of
these platforms is to promote price discovery through competitive bidding, faster processing,
and access to a broader pool of international capital by enabling on-boarding of global
financiers.
At present there are four entities operating these platforms, significantly enhancing the
efficiency and ease of international trade transactions originating from or routed through India.
IFSCA also permits the ITFS to connect with any other electronic platform/market
infrastructure, within and outside IFSC, to bring in efficiency and also undertake secondary
market transactions.
The trade finance volumes facilitated through ITFS platforms stand at USD 29.79 million in FY
2024-25, with the figures showing an upward growth trend.
International cooperation:
IFSCA is at an advanced stage of collaborating with global bodies such as Factors Chain
International (FCI) to integrate with international factoring networks, which will expand access
to global trade finance ecosystem for entities in IFSC.
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PRESS RELEASE
Sustainable and Green Trade Finance
IFSCA has mandated lending institutions in IFSC a target of 5% of their loan outstanding as
on the previous financial year. This target can also be met by financing towards sustainable
trade finance transactions. This acts as a step towards aligning financial flows with global ESG
goals and strengthening India’s role in sustainable supply chains.
Raising capital through listing of bonds
GIFT City, India’s International Financial Services Centre (IFSC), continues to create a globally
competitive investment environment for international investors. The regulatory regime notified
by IFSCA, based on globally benchmarked regulations, enables Indian exporters to raise
foreign capital through listing of foreign currency/ masala bonds on the recognised stock
exchanges in the IFSC.
Non-resident investors subscribing to bonds issued by Indian companies or business trusts
and listed on recognized stock exchange platforms in GIFT City enjoy a highly favorable
withholding tax rate of only 9% on interest income. This attractive tax framework significantly
boosts post-tax returns for global investors and positions GIFT City as a preferred destination
for capital raising and investment, reinforcing India’s vision of establishing a world-class
financial hub.
Insurance and Risk Mitigation
The insurance sector in IFSC complement trade finance by offering trade credit insurance to
safeguard exporters against buyer defaults and non-payment risks. Currently to support the
Indian exporters the IFSC Insurance Offices (IIOs) offers insurance products, covering export
related risk such as -
i. credit risk
ii. political risk
iii. non-acceptance risk
iv. re-shipment
v. re-import risks.
IIOs assess the market risk and provide advisory to exporters to mitigate potential risk.
Gandhinagar
August 29, 2025
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