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In October 2025, Union Finance Minister Nirmala Sitharaman launched the Foreign Currency Settlement System (FCSS) at the International Financial Services Centre (IFSC) in GIFT City, Gujarat. This marks a transformative step in India’s financial ecosystem, placing GIFT City among leading global financial hubs such as Hong Kong, Tokyo, and Singapore.

What is the Foreign Currency Settlement System (FCSS)?

The FCSS is a real-time payment and settlement mechanism that enables entities operating within GIFT IFSC to conduct and settle foreign currency transactions (initially in USD) locally — eliminating the dependence on foreign correspondent banks.

Key Highlights

• Real-Time Settlements: Transactions that earlier took 36–48 hours through correspondent banking now settle in 4–5 seconds.
• Regulatory Framework: Operates under the Payment and Settlement Systems (PSS) Act, 2007, authorised by the International Financial Services Centres Authority (IFSCA).
• System Operator:CCIL IFSC Ltd, a subsidiary of the Clearing Corporation of India Ltd (CCIL).
• Technology Partner:Indian Financial Technology & Allied Services (IFTAS), a wholly-owned subsidiary of the Reserve Bank of India (RBI).
• Settlement Bank:Standard Chartered Bank serves as the initial settlement partner.

How Does It Work?

Under the FCSS framework:

• Each participating bank’s IFSC Banking Unit (IBU) maintains an account with a designated local settlement bank.
• Inter-bank foreign currency transactions are cleared and settled within GIFT City, avoiding the complex multi-leg Nostro account chains used abroad.
• The system ensures secure, transparent, and regulated processing of global transactions under the IFSCA’s oversight.

Why It Matters – Strategic Significance

• Reduces Dependence on Overseas Systems: Earlier, entities in GIFT IFSC relied on foreign banks for USD, euro, or yen settlements, leading to delays, higher costs, and exposure to external risks. FCSS eliminates this dependence by localising global settlements within India.
• Enhances Liquidity and Efficiency: The system allows near-instant settlement, improving liquidity management for banks and financial institutions. It reduces counterparty and settlement risks while enabling smoother cross-border trade and investment.
• Boosts India’s Global Financial Standing: By offering a robust settlement mechanism, GIFT City now joins an elite league of financial centres with domestic forex settlement capabilities, strengthening India’s position as an emerging global financial hub.
• Promotes Financial Inclusion for Indian Entities: With lower transaction costs, faster settlement times, and reduced reliance on foreign intermediaries, Indian corporates and banks can manage international transactions more efficiently within domestic jurisdiction.
• Supports Multi-Currency Expansion: While the system currently supports the US Dollar, it is designed to incorporate other major currencies such as the Euro, Pound Sterling, and Japanese Yen, ensuring scalability and global integration.

About GIFT City: India’s Global Financial Gateway

• Full Form: Gujarat International Finance Tec-City (GIFT City).
• Location: Between Ahmedabad and Gandhinagar, Gujarat.
• Regulator: International Financial Services Centres Authority (IFSCA) — established in 2020 as a unified regulator for all financial services within the IFSC.
• Nature: A Special Economic Zone (SEZ) that operates as a liberalised financial jurisdiction under Indian sovereignty, with tax incentives, global regulations, and ease-of-doing-business provisions.

Achievements So Far

• Hosts over 1,000 registered entities, including global banks, insurance firms, fintechs, and asset managers.
• Houses India INX and NSE IX, offering 22-hour trading in global securities.
• Developed India’s first aircraft and ship leasing ecosystem, attracting global lessors and fund managers.
• Emerging hub for offshore derivative instruments, green bonds, and ESG investments.

Economic Rationale Behind GIFT City

• Before GIFT City, many Indian companies preferred offshore hubs such as Singapore or Mauritius for fund-raising and financial operations due to friendlier regulatory environments. This resulted in capital outflow and revenue loss for India.
• GIFT City’s creation aimed to repatriate offshore financial activities, foster global competitiveness, and position India as a financial intermediary for international capital flows.