Sitharaman launches foreign currency settlement system at GIFT CITY:Know how it will work, benefits | All details

The Union Finance Minister Nirmala Sitharaman recently launched the Foreign Currency Settlement System in GIFT City, Gandhinagar, Gujarat. Now, India has joined the ranks of very few countries in the world that have a localised clearance system of transaction process of international currencies. These countries are Hong Kong, Tokyo, Manila, etc. Find below Sitharaman’s ‘X’ post on the launch: So, lets see what is the Foreign Currency Settlement System: GIFT City, in Gujarat, is becoming a hub for international business. Now, it has a new system to make dealing with foreign money easier. This system is called the Foreign Currency Settlement System. What is This System About? Imagine you’re running a business in GIFT City and need to pay a company in the United States in US dollars. Or maybe you’re receiving money from a client in Europe in Euros. The Foreign Currency Settlement System helps you do these transactions smoothly, without having to convert the money into Indian Rupees first. Why is it Useful? This system is useful for a few reasons: Saves Time and Money: Converting money back and forth between Rupees and other currencies can take time and cost extra in fees. This system cuts out that step.
Attracts More Businesses: By making it easier to deal with foreign money, GIFT City can attract more international companies to set up shop there.
Boosts International Trade: When businesses can easily pay and receive money in different currencies, it encourages more trade with other countries. How Does it Work? Now banks and financial institutions can hold and transfer money in international currencies like dollars, sterling pound, etc. When, two business one from domestic country and the other from the abroad nation need to exchange money in respective currencies, they can do it directly through the recently launched settlement system of foreign currencies. What Does it Mean for India? This new system is a big step for GIFT City and for India’s ambitions to become a major player in the global financial market. It makes GIFT City a more attractive place for international businesses and helps to boost India’s overall economy. By simplifying foreign currency transactions, the system paves the way for increased investment and trade, further solidifying GIFT City’s position as a key financial hub. Currently, for international transactions, the RBI allows banks to maintain two types of accounts one is vostro and the other is nostro. How Vostro A/C works? The word Vostro is a latin word which means ‘Yours’. Vostro A/C is maintained by domestic country’s banks for the foreign countries. Someone from the abroad country can send money in Indian currency in such accounts. How Nostro A/C works? Nostro A/C is held by domestic bank with the foreign bank in the currency of the latter.