Potential for ITFS Collaboration

Background

The International Financial Service Centre Authority (IFSCA) has issued a circular in July 2021, providing a framework to establish an International Trade Financing Services Platform (ITFS). ITFS is a Government initiative to support the exporters and importers by providing a marketplace for exporters / importers to obtain finance from various financiers at competitive pricing. The platform will also enable Banks/Financiers to expand their reach to exporters and importers without having ground presence in the regions where the exporters/importers are present.

How will it work?

These new ITFS services, which are currently at the first stage, are designed to provide Indian MSMEs easy liquidity (early payment) against invoices after exporting their goods and services to various markets, from various financiers on boarded with ITFS.

The ITFS framework will provide an opportunity to the participants to avail trade finance facilities for trade transactions such as Export Invoice Trade Financing, Reverse Trade Financing, Bill Discounting under Letter of Credit, Supply Chain Finance for Exporters, Export Credit (Packing Credit), Insurance/Credit Guarantee, Factoring and any other eligible product, on the ITFS platform.

The companies set up as ITFS shall provide electronic platforms to all participants. It shall disseminate the information about bills/invoices, discounting and quotes in real time basis, supported by a robust MIS (Management Information System) to all relevant parties. It shall also have a suitable Business Continuity Plan (BCP), including a disaster recovery site.

Who can set up an ITFS?

A bank or a finance company must incorporate as a separate company to be set up as an ITFS in an IFSC. The parent entity or promoters or promoter groups of the company applying to set up a company as ITFS should have a minimum net worth of US$ 1 million. The company, proposed to be set up as ITFS, should have a minimum paid-up equity capital of US$ 0.2 million or equivalent in any other freely convertible currency.

Exim Bank in ITFS

Exim Bank would be paying a significant role in the ITFS platform which will not only complement its factoring business but will also be in line with the Bank’s strategy to support the Government’s focus on the growth of Exports.