GIFT City Officials Reach Out to RBI for Setting up Dollar Payment System

Gujarat International Finance Tec-City (GIFT City) is currently being developed in the Gandhinagar district of Gujarat, India, as its central business district. Gujarat government promoted the development of India’s first greenfield smart city and international financial services centre, which is now operational. The Global Financial Centres Index for 2020 listed GIFT IFSC as 10th in the Finance Industry and the top-ranked emerging financial centre, housing 23 multinational banks including BLS, Lloyds, Merck (established in 1974), and Standard Chartered. In addition, there are 35 fintech companies included in it, along with two international stock exchanges with daily trading volumes of $30. 6 billion and India’s first international bullion exchange with 75 onboard jewellers.

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Officials from GIFT City have embarked on talks with the Reserve Bank of India (RBI) to explore the development of a dollar payment mechanism, aiming to streamline transactions in the US currency for enhanced efficiency.
According to sources familiar with the matter, a prospective dollar payment system may bear resemblance to the existing Real-Time Gross Settlement System (RTGS), as reported by ET.

The report highlighted ongoing deliberations, stating, “Preliminary discussions are underway as the current process entails a significant time lag for a dollar transaction from a bank’s nostro account overseas to reach a subsidiary in GIFT City.”

By infusing a human touch and ensuring uniqueness, the sentence has been transformed into a more engaging and reader-friendly format.

Imagine a nostro account as your local bank’s passport to a foreign land, where it holds funds in the local currency.

Now, picture this: a bright idea is brewing in the corridors of GIFT City – the creation of a singular ‘settlement bank’. Picture other entities stashing their dollar reserves in this bank, where all transactions dance to its tune, as whispered by insiders.

Whispers suggest that the Clearing Corporation of India might step into the limelight, shouldering the responsibility of orchestrating an RTGS-inspired model. Their track record in such financial choreography speaks volumes.

In this tale of financial intrigue, imagine a world sans counterparties or trades. Instead, the CCIL emerges as the unsung hero, seamlessly conducting one-legged US dollar transactions, as revealed by insiders.

Last July, Finance Minister Nirmala Sitharaman made an important announcement: the government would greenlight the direct listing of Indian companies on exchanges at GIFT-IFSC. Fast forward to January, and the Centre has cleared the path for this initiative by unveiling the necessary regulations. What does this mean? Well, it’s quite the breakthrough. Indian companies can now take their shares directly to international stock exchanges, such as the India International Exchange and NSE International Exchange. These exchanges fall under the watchful eye of the International Financial Services Central Authority (IFSCA).

This news couldn’t have come at a better time. There’s word that the Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund, is gearing up to establish a whopping $4.5 billion fund. Its aim? To dive into investments in India via the GIFT City. Exciting times ahead, no doubt!

The IFSCA, which oversees financial services activities at GIFT City, has granted preliminary approval to ADIA for establishing a fund. This milestone marks ADIA as the pioneering sovereign wealth fund to establish a presence in this tax-neutral financial hub.

It’s worth noting that through the GIFT City channel, ADIA gains the opportunity to invest in various sectors including Indian startups, debt securities, and both Indian and foreign equities.

The government’s vision is to transform GIFT City into a prominent global financial center and a sought-after destination for startups and investors alike. Consequently, a surge in startup investments within GIFT City has been observed. For instance, Paytm recently announced its plans to inject INR 100 Crore into GIFT City, aiming to foster a thriving global financial ecosystem. Similarly, Infibeam Avenues is exploring the establishment of an AI hub within GIFT, further emphasizing the city’s appeal.

The city aims to streamline US currency transactions by establishing a singular ‘settlement bank’, possibly managed by the Clearing Corporation of India. The Centre’s approval of direct listings for Indian companies at GIFT-IFSC, overseen by IFSCA, has attracted the attention of the ADIA, set to establish a $4.5 billion fund for investments via GIFT City. The surge in startup investments, exemplified by Paytm and Infibeam Avenues, aligns with the government’s vision of positioning GIFT City as a prominent global financial center and sought-after investment destination.

Moreover, Zoho achieved a remarkable milestone as its overall sales surged beyond the $1 billion mark in the financial year ending on March 31, 2023. As an impressively bootstrapped unicorn, Zoho reported a substantial operating revenue of INR 8,703.6 Cr ($1 billion) in FY23, marking a substantial 30% leap from INR 6,710.7 Cr in FY22. Notably, its net profit also saw a respectable 3% increase, reaching INR 2,836 Cr from INR 2,749 Cr in FY22.

Zoho has launched Zakya, a POS solution tailored for Indian retail enterprises to streamline operations and enhance customer experience. Zakya aims to support small and medium-sized enterprises, targeting a retail landscape with substantial growth potential. Offering support in 10 Indian languages and seamless integration with payment and shipping partners, Zakya has gained traction since its beta launch, welcoming over 170 active stores. Zoho’s robust financial performance, with significant revenue growth and surpassing the $1 billion sales mark, reflects India’s emergence as its fastest-growing market.