Foreign Currency Settlement System:
The Union Finance Minister launched a Foreign Currency Settlement System (FCSS) at the International Financial Services Centre (IFSC) in Gujarat International Finance Tec-City (GIFT City).
- It is established under a comprehensive legal and regulatory framework of the Payment and Settlement Systems Act, 2007.
- It is authorised by International Financial Services Centres Authority (IFSCA).
- It enables foreign currency transactions between IFSC Banking Units (IBUs) to be settled locally instead of routing through the traditional correspondent banking route.
- It provides a structured framework for the settlement of foreign currency transactions, enabling market participants to process cross-border payments with greater speed, reliability, and legal certainty.
- Initially, the system will support US dollar transactions, with scope to add other foreign currencies over time.
- It is operated by the CCIL IFSC Limited (CCIL IFSC), a subsidiary of Clearing Corporation of India Limited.
- Currently, foreign currency transactions in GIFT IFSC are processed via correspondent banking routes i.e through multiple Nostro account relationships (accounts held with foreign banks) and intermediaries to route funds.
- That chain of relay can lead to settlement lags of 36 to 48 hours.
International Financial Services Centres Authority:
- It is a statutory authority established under the International Financial Services Centres Authority Act, 2019.
- The IFSCA is a unified authority for the development and regulation of financial products, financial services, and financial institutions in the International Financial Services Centre (IFSC) in India.
