Why in news?
The International Financial Services Centres Authority launched a Foreign Currency Settlement System (FCSS) at Gujarat International Finance Tec‑City (GIFT City) in October 2025. The system allows banks operating in the special economic zone to settle trades in foreign currencies on a real‑time gross settlement basis.
Why it was needed
India’s growing trade and investment flows require efficient foreign currency transactions. Previously, cross‑border settlements were routed through correspondent banks abroad, increasing costs and settlement time. GIFT City aims to create a globally competitive financial centre, and a dedicated settlement infrastructure is a key component.
Features of the FCSS
- Multiple currencies: The system initially supports U.S. dollars, euros and British pounds, with plans to add more currencies.
- Real‑time settlement: Transactions are settled instantly on a gross basis, reducing counterparty risk.
- Central counterparty: The Clearing Corporation of India acts as the central counterparty, ensuring smooth processing and providing settlement guarantee.
- Integration with payment systems: The FCSS connects with SWIFT and domestic payment gateways, simplifying fund transfer for banks and trading platforms.
- Regulatory oversight: The International Financial Services Centres Authority regulates the system, ensuring compliance with anti‑money laundering and know‑your‑customer norms.
Implications
The FCSS will reduce transaction costs for Indian banks and corporates, encourage global investors to transact through GIFT City and strengthen India’s position in the international financial architecture. As the system matures, it could support derivatives trading and cross‑border payments in the rupee, enhancing currency internationalisation.