Following the successful implementation of real-time dollar settlements last year, the International Financial Services Centres Authority (IFSCA) has formally approached the Government of India for approval to launch a Real-Time Euro Foreign Exchange Settlement system. As of March 20, 2026, the proposal is in the final stages of review, marking a strategic move to position GIFT City (Gujarat International Finance Tec-City) as a true multi-currency global hub.
The “Nostro” Problem: Why This Matters
Currently, most euro-denominated transactions in India are routed through the “correspondent banking” model. This involves a chain of intermediary banks and Nostro accounts (accounts held by Indian banks in Europe), leading to:
- Time Lags: Transactions often take 24 to 48 hours to clear.
- Higher Costs: Each intermediary bank in the chain charges a fee.
- Settlement Risk: Delays increase the window for counterparty default or currency fluctuations.
The new Foreign Currency Settlement System (FCSS) aims to internalize this process, allowing banks within GIFT City to settle euro trades directly and instantly.
Key Benefits of the Euro Settlement System
| Feature | Traditional Correspondent Banking | GIFT City Real-Time System (2026) |
| Settlement Time | 24 – 48 Hours | 30 – 45 Seconds |
| Intermediaries | Multiple Global Banks | Central Settlement Bank (Local) |
| Risk Profile | High Liquidity & Settlement Risk | Real-Time Gross Settlement (RTGS) |
| Operating Hours | Dependent on EU Bank Timings | 24×7 / Near-Instant |
Strengthening the India-EU Corridor
The timing of the proposal is not accidental. It coincides with the accelerating negotiations for the India-EU Free Trade Agreement (FTA).
- Trade Facilitation: EU is one of India’s largest trading partners; a faster payment rail will significantly lower the cost of doing business for exporters and importers.
- Investment Inflow: European Private Equity (PE) and Venture Capital (VC) funds can deploy capital into Indian startups and infrastructure via GIFT City without the friction of multi-day settlement delays.
- Competing with Hubs: By offering real-time euro, dollar, and potentially Yen or Pound settlements, GIFT City is moving to directly compete with established financial centers like Singapore, Dubai, and Hong Kong.
The Infrastructure Behind the Scenes
- Settlement Bank: While Standard Chartered currently facilitates the dollar leg, the IFSCA is expected to invite bids for a designated “Euro Settlement Bank” to act as the central clearing hub.
- Technology Partner: The system is powered by software from IFTAS (a subsidiary of the RBI) and operated by CCIL IFSC Limited.
- Regulatory Oversight: The system operates under the Payment and Settlement Systems (PSS) Act, 2007, ensuring it meets international standards for financial stability and cyber-resilience.
What Experts Are Saying
“Integrating the euro is the natural next step. The dollar system proved that we can cut settlement times from a day to seconds. Doing this for the euro will make GIFT City the preferred gateway for the €200+ billion in annual trade between India and the European Union,” noted a senior IFSCA official.
