
Imagine a world where dollar trades between exporters and banks clear in seconds, not hours. That’s the quiet ambition behind new talks to enable real-time foreign exchange settlement through GIFT City — a push the Reserve Bank of India and the International Financial Services Centres Authority (IFSCA) are actively pursuing with domestic banks and global partners.
The idea is deceptively simple: move more of the settlement plumbing onshore, and then modernize it. By linking liquidity pools, payment rails and settlement engines inside GIFT City, transactions that once required multiple intermediaries and time-zone juggling could be completed almost instantly. For a country that moves hundreds of billions in trade and capital each year, the implications ripple from Treasury desks to small exporters in Surat and Coimbatore.
Why speed matters — and why now
Settlement speed isn’t just a convenience. It materially affects:
- Liquidity costs: shorter settlement windows mean less need for banks to fund nostro accounts overseas.
- Hedging expenses: exporters can reduce hedging duration and costs if cash flows settle faster.
- Resilience: faster domestic rails reduce exposure to offshore counterparty or geopolitical disruptions.
What the architecture looks like ?
Think of it as three linked layers:
- Liquidity Pools: domestic and international banks maintain onshore euro/dollar/yen pools in GIFT City.
- Settlement Engine: an RTGS-like system for FX that records, confirms, and finalizes trades instantly.
- Connectivity: SWIFT/clean-room integrations and API links to corporate treasury systems for straight-through processing.
Who wins ; and who needs to adapt
The initial winners are likely to be large banks, exporters with tight cash cycles, and fintechs building global-payments rails. But adaptation will be required across the board:
- Banks: must retool treasury systems and manage liquidity more actively within India’s jurisdiction.
- Exporters/importers: may need treasury upgrades to take advantage of real-time settlement.
- Regulators: must craft oversight, KYC and cross-border reporting that balance speed with safety.
“Real-time FX settlement is a technological and regulatory challenge — but its payoff is systemic resilience.” — senior payments consultant (paraphrase)
Challenges and guardrails
Technical upgrades are only part of the journey. Regulators will need to ensure:
- Liquidity backstops: mechanisms to manage failed settlements and intraday shortfalls.
- Cross-border compatibility: seamless reconciling with global counterparty systems, SWIFT, and CLS-like engines.
- Compliance & surveillance: real-time monitoring to detect fraud, AML and sanctions risks.
Past → Present → Near Future
Historically, FX settlement relied on overseas nostro relationships and time-zone sequencing. Today, GIFT City hosts the infrastructure; the present push is to overlay rapid settlement rails. Near-term, expect pilots where large banks settle interbank USD and EUR trades inside GIFT. If pilots succeed, broader corporate flows and additional currencies will follow.
What to watch (next 6–12 months)
- Which banks join pilot programs (Standard Chartered has been involved in the dollar lane; will others like SBI/ICICI follow?).
- Which currencies are added after USD — Euro, Pound, Dirham or Yen?
- Regulatory clarity on liquidity provisioning and failed-settlement management.
- Uptake by corporates and fintechs: will smaller exporters get access, or will it remain an institutional play?
Quick FAQs
Q: Will this make cross-border payments cheaper for ordinary people?
A: Indirectly — as banks and businesses save on liquidity costs and hedging, some of that efficiency can pass on to consumers, but change will be gradual.
Q: Is this the end of SWIFT?
A: No — SWIFT and global settlement utilities will remain crucial. This move creates a complementary, resilient onshore lane for many transactions.