Introduction
Standard Chartered Bank has been selected as the settlement bank for real-time settlement of all dollar-denominated trades in India's inaugural global financial hub, the Gujarat International Finance Tec-City (GIFT City). The initiative, which is expected to go live by end-June 2025, is intended to accelerate transactions and help Prime Minister Narendra Modi's vision to onshore rupee-related trading.
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Enhancing Financial Infrastructure in GIFT City
GIFT City in western India has been progressively developing into a prominent international financial center. Standard Chartered's strategic appointment as the settlement bank is part of efforts to reinforce the city's financial infrastructure. Banks in GIFT City have been instructed to establish trading accounts with Standard Chartered to facilitate the real-time and seamless settlement of trades.
As of December 2024, banking units in GIFT City had foreign currency and interest rate derivatives outstanding at $249 billion, up 68% year-on-year. This phenomenal growth underscores the increasing importance of GIFT City in global finance.
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Simplifying Dollar Settlements
Currently, the settlement of trades between different banks in GIFT City is not in real time. Depending upon the currency and the time during the day when a trade is carried out, the settlement takes anywhere from a few hours to more than a day. With the inclusion of Standard Chartered as the settlement bank, the process is about to change by enabling real-time settlements, thereby reducing delays and enhancing efficiency.
This step is in alignment with global efforts at enabling cross-border trades to be faster and easier. Traditionally, such trades have relied on a network of correspondent banks, increasing cost and time. By locating the settlement process in a hub in GIFT City, India aims to position itself as a more competitive platform for international financial transactions.
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Joint Efforts and Future Outlook
The Clearing Corporation of India Ltd. (CCIL), the depository for all onshore forex and bond trading, has opened a unit at GIFT City to provide local clearing services. This move complements the efforts of Standard Chartered in streamlining the settlement process. While Standard Chartered has declined to comment on this step, and CCIL has not responded to calls, the collaboration between these institutions is expected to enhance the operational efficiency of GIFT City significantly. In addition to these plans, there have been discussions of implementing a Real-Time Gross Settlement (RTGS)-style dollar payment system in GIFT City. This would also ease US dollar transactions, making the financial hub even more internationally competitive.
Global Context and Implications
The move to establish a real-time dollar settlement system in GIFT City is part of a broader global trend to make cross-border financial transactions more efficient.
Efforts are underway globally to enable cross-border trades that are faster and easier, as current mechanisms involve using a chain of correspondent banks, which increases the time and cost. By adopting such systems, financial hubs like GIFT City can position themselves as more competitive places for financial activities from around the world.
Conclusion
Standard Chartered's appointment as the dollar-trade settlement bank for trades denominated in the greenback in GIFT City marks an important step in the Indian ambition of a global financial hub. This action should further increase the ease of financial transactions, attract greater foreign business, and assist the broader goal of onshoring rupee-trades. With more developments within GIFT City in the times to come, GIFT City should find a prominent place for itself in global financial circles.