The International Financial Services Centres Authority (IFSCA) has issued revised guidelines for setting up and operating International Trade Finance Service (ITFS) platforms, effective immediately as of April 11, 2025. These guidelines replace the earlier framework dated July 09, 2021, and introduce critical updates for ITFS operators, financiers, and participants. Hereโs what you need to know:
1. ๐๐ฅ๐ข๐ ๐ข๐๐ข๐ฅ๐ข๐ญ๐ฒ ๐๐ง๐ ๐๐๐ ๐ข๐ฌ๐ญ๐ซ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ซ ๐๐๐ ๐ ๐๐ฉ๐๐ซ๐๐ญ๐จ๐ซ๐ฌ
- Entities must be newly incorporated under the Companies Act, 2013.
- Parent entities must have at least three years of experience in financial market infrastructure or fintech platforms.
- Minimum owned fund requirement: USD 200,000.
- Robust technological infrastructure is mandatory, including real-time MIS, disaster recovery systems, and surveillance capabilities.
2. ๐๐ฉ๐๐ซ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ ๐ซ๐๐ฆ๐๐ฐ๐จ๐ซ๐ค
- Permissible Activities: Factoring, reverse factoring, bill discounting under LCs, supply chain financing, and more. Secondary market transactions are also allowed.
- Participant Onboarding: Financiers (participants) must meet strict criteria, including minimum AUM and capital of USD 5 million, compliance with FATF norms, and proven debt recovery capabilities.
- Technology Requirements: ITFS platforms must ensure data security, annual IT audits, and business continuity plans.
3. ๐๐จ๐ฏ๐๐ซ๐ง๐๐ง๐๐ ๐๐ง๐ ๐๐จ๐ฆ๐ฉ๐ฅ๐ข๐๐ง๐๐
- ITFS operators must adopt corporate governance policies aligned with IFSCAโs 2021 guidelines.
- โFit and Properโ criteria apply to directors and key personnel, with ongoing evaluations by the Authority.
- Outsourcing is permitted but restricted for critical functions like participant onboarding and daily operations.
4. ๐๐ข๐ฌ๐ค ๐๐๐ง๐๐ ๐๐ฆ๐๐ง๐ญ ๐๐ง๐ ๐๐ข๐ฌ๐ฉ๐ฎ๐ญ๐ ๐๐๐ฌ๐จ๐ฅ๐ฎ๐ญ๐ข๐จ๐ง
- ITFS operators must implement comprehensive risk management frameworks.
- Credit risk rests with financiers, not the platform. Legal disputes are handled outside the ITFS.
- Grievance redressal mechanisms must comply with IFSCAโs December 2024 circular.
5. ๐๐ฎ๐ซ๐ซ๐๐ง๐๐ฒ ๐๐ง๐ ๐๐๐ฉ๐จ๐ซ๐ญ๐ข๐ง๐
- Accounts must be maintained in USD, though transactions can settle in any specified foreign currency.
- Regular financial reporting to IFSCA is mandatory.
A copy of the Circular is attached herein for your reference. Readers are encouraged to provide their comments and suggestions toย Regstreet Law Advisorsย atย info@regstreetlaw.com.