Officials from the GIFT City have reached out to the Reserve Bank of India (RBI) for consultations in setting up a dollar payment system mechanism that aims to bring about greater efficiency in transactions conducted in the US currency, sources aware of the developments told ET.
“There are initial discussions about this matter because at present when a dollar transaction happens from one bank’s nostro account abroad, it takes several hours for a subsidiary in GIFT City to receive the dollars,” one of the sources said.
A potentially new dollar payment system could be akin to the existing Real-Time Gross Settlement System (RTGS), said the source.
A nostro account refers to an account held abroad by a local bank, with currency holdings denominated in the currency of the foreign country.
Among the proposals currently being discussed was the establishment of a single ‘settlement bank’ in GIFT City, with which other entities would have dollar balances. Subsequently, debits and credits would be conducted through the settlement bank, sources said.
Emails sent to the RBI and the GIFT City seeking comment on the matter did not receive responses by the time of publication.
“Chances are that the Clearing Corporation of India would be called upon to operate as a facilitator for an RTGS-type model because they have expertise in handling such operations,” another source said.
“There would be no counterparty guarantee or trades – the CCIL would basically act as a payment system for a one-leg US dollar transaction,” the source said.
In June 2023, the RBI permitted banks operating in International Financial Services Centre (IFSC) to offer non-deliverable derivatives contracts utilising rupees to resident non-retail users for hedging.
The step was taken in order to develop the onshore rupee non-deliverable derivatives contract market and to provide residents with the flexibility to efficiently plan their hedging activities, the RBI said.
Such transactions would be cash-settled in rupees and shall have the flexibility of cash settlement between two relevant banks and between a bank and a person residing outside India in rupees or any foreign currency.
