In a bid to accelerate its global trade ambitions and reduce foreign-exchange friction, India has inaugurated a foreign currency settlement system at Gujarat International Finance TecCity (GIFT City), its designated international financial services centre (IFSC). Finance Minister Nirmala Sitharaman led the launch in October 2025, describing it as a "step-change" in how India will handle inbound and outbound trade flows.

Historically, India's exporters and importers have been constrained by domestic banking rules, capital controls oversight and high cost of hedging rupee/dollar exposures. The new settlement framework enables transactions in multiple foreign currencies directly within the IFSC, reducing reliance on traditional on-shore banking channels and enhancing the attractiveness of GIFT City as a hub.

For global trade finance practitioners, the implications are manifold.

First, this settlement capability means that Indian exporters might receive payment or settle liabilities in non-USD currencies more easily, shifting the paradigm of documentary credits, guarantees and swap arrangements tied to the US dollar.

Second, banks and financiers active in Indian trade will need to adjust their KYC/AML, credit risk and documentation protocols to account for the IFSC's open-currency environment.

Third, the move supports India's broader "digital-first" infrastructure ambitions: by empowering currency flexibility, GIFT City becomes both a sourcing node for global supply chains and a financing node for inbound investment.

However, the shift is not risk free. Multi-currency settlement demands higher standards of foreign exchange risk management, cross-border compliance, and settlement finality assurance. Trade finance banks dealing with counterparties active through GIFT City will need visibility on how those flows are documented, insured, collateralised and reported. ESG, sanctions, export control filters and digital audit trails will remain front of mind.

Longer term, this model may encourage other emerging markets to replicate IFSC-style zones where export finance, risk mitigation, currency settlement and trade documentation converge. For the major trade finance institutions, India's move signals that "localised" trade-finance hubs, with autonomous settlement arrangements, are gaining traction.

In conclusion: while India's GIFT City foreign currency settlement initiative may appear a regional development, it is globally relevant. It reflects evolving trade finance architecture in which currency flexibility, institutional innovation and infrastructural positioning align to enable new flows.

For trade finance professionals, the takeaway is clear: global trade is no longer anchored in a legacy currency-dominated settlement system, hubs such as GIFT City are potentially rewriting the rules.

https://economictimes.indiatimes.com/nri/invest/sitharaman-launches-foreign-currency-settlement-system-in-gift-city/articleshow/124355652.cms?utm_source=chatgpt.com&from=mdr