Source: TOI
Context:
With diplomatic relations between India and China gradually warming, the Indian government and the International Financial Services Centres Authority (IFSCA) are revisiting a proposal to allow International Banking Units (IBUs) in GIFT City to transact in the offshore renminbi (CNH). This move could expand the range of financial products offered and strengthen GIFT City’s position as a global financial hub.
Background
- GIFT City: India’s premier International Financial Services Centre (IFSC), designed to provide global-standard financial services and professional solutions.
- Currency Proposal: Banks suggested including CNH (offshore yuan) as a permitted currency for IBUs in October 2025.
- Onshore vs. Offshore Renminbi:
- CNY: Onshore renminbi traded within China.
- CNH: Offshore renminbi traded internationally, widely accepted for cross-border transactions.
Rationale for the Proposal
- Global Trade Alignment:
- China is a major trade partner, and CNH is increasingly used in international trade settlements.
- Permitting CNH transactions would allow Indian banks to offer more diverse products and services to clients.
- Strategic Importance:
- Enhances financial diplomacy with China.
- Supports the vision of a multipolar global financial system by reducing dependence on the US dollar.
- Market Opportunity:
- IBUs in GIFT City currently transact in 15 currencies and offer spot and derivative products.
- Allowing CNH would expand the offshore liquidity pool and promote bilateral trade.
Past Developments
- In 2024, IFSCA recommended five freely floating currencies, including CNH, for IBUs.
- The government approved four currencies — SEK, DKK, NOK, NZD — but excluded CNH due to diplomatic sensitivities.
- With the easing of India-China tensions, the CNH proposal is now under high-level review.
