A potentially new dollar payment system might resemble the current Real-Time Gross Settlement System (RTGS)
Initial talks are underway due to delays in dollar transactions from a bank's nostro account abroad to a GIFT City subsidiary, taking several hours
FM Nirmala Sitharaman announced in July last year that the government would allow direct listing of Indian companies at GIFT- IFSC exchanges
GIFT City officials have initiated consultations with the Reserve Bank of India (RBI) on building a dollar payment system mechanism that aims to bring about greater efficiency in transactions conducted in the US currency.
A potentially new dollar payment system might resemble the current Real-Time Gross Settlement System (RTGS), ET reported, citing sources close to the matter.
“There are initial discussions about this matter because at present when a dollar transaction happens from one bank’s nostro account abroad, it takes several hours for a subsidiary in GIFT City to receive the dollars,” the report said.
A nostro account is an account held by a local bank in a foreign country, denominated in the currency of that country.
One proposal under discussion involves creating a single ‘settlement bank’ in GIFT City. Other entities would maintain dollar balances with this bank, and transactions would be carried out through it, the sources added.
The Clearing Corporation of India could likely be tasked with operating as a facilitator for an RTGS-type model, given their expertise in managing such operations.
In this scenario, there would be no counterparty guarantee or trades; the CCIL would essentially function as a payment system for a one-leg US dollar transaction, the source added.
In July last year, Finance minister Nirmala Sitharaman announced that the government would allow direct listing of Indian companies at GIFT- IFSC exchanges.
In January, the Centre paved the way for the direct listing of Indian companies on the exchanges of GIFT City by announcing the corresponding rules. This development allows Indian companies to list their shares on international stock exchanges, specifically the India International Exchange and NSE International Exchange, both operating under the regulatory oversight of the International Financial Services Central Authority (IFSCA).
This comes at a time when, the Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund, is reportedly planning to establish a $4.5 Bn fund to invest in India through the GIFT City.
The International Financial Services Centres Authority (IFSCA), the regulatory authority for financial services at GIFT City, granted in-principle approval to ADIA for setting up the fund. With this, ADIA has become the first sovereign wealth fund to set up base in the tax-neutral finance hub.
It is pertinent to note that the GIFT City route will allow the investment giant to invest in Indian startups, debt securities, and both Indian and foreign equities.
The government aims to develop GIFT City into a global financial hub and a virtual offshore destination for startups and investors.
As a result, a number of startups have also started making investments in GIFT City. Paytm recently said it would invest INR 100 Crore in GIFT City to build a global financial ecosystem, while Infibeam Avenues is also looking to establish an AI hub in GIFT.
A number of investors have also moved to the city in Gujarat. Last month, angel investment networking platform We Founder Circle (WFC) said its GIFT City Fund raised $10 Mn (around INR 83 Cr) and onboarded more than 250 investors.
