The Reserve Bank of India (RBI) has taken a significant step towards smoother trade practices by allowing 20 banks in India to open 92 Special Rupee Vostro Accounts (SRVAs) with partner banks from 22 countries. This move enables exporters and importers from these nations to conduct trade transactions in their domestic currencies, fostering efficient trade practices.
Strengthening Economic Ties
The list of countries eligible for Special Rupee Vostro Accounts includes Bangladesh, Belarus, Botswana, Fiji, Germany, Guyana, Israel, Kazakhstan, Kenya, Malaysia, Maldives, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom. This strategic decision is expected to strengthen economic ties between India and these nations.
Promoting Bilateral Trade
A significant development came with the signing of a Memorandum of Understanding (MoU) between the RBI and the Central Bank of UAE on July 15, 2023. This MoU allows exporters and importers to invoice and pay in their respective domestic currencies, fostering a bilateral foreign exchange market and enhancing trade relations between India and the UAE.
Framework for International Trade Settlement
In February of the current year, the RBI introduced a framework allowing invoicing and payments for international trade in Indian Rupee (INR). This initiative aims to boost global trade, particularly Indian exports, and meet the growing demand for INR in international transactions. The framework applies to any partner country engaged in trade with India in INR.
Encouraging INR in Export Settlements
The Directorate General of Foreign Trade (DGFT) incorporated provisions in the Foreign Trade Policy to facilitate international trade settlements in INR. This includes covering invoicing, payment, and export/import settlements. Export benefits and fulfillment of Export Obligations are now granted for export realizations in INR, in accordance with RBI guidelines.
Understanding Vostro Accounts: Key Points
- Vostro accounts allow foreign banks to hold funds and settle transactions in their domestic currencies with correspondent banks in other countries.
- The move aims to facilitate international trade and cross-border transactions, reducing currency conversion costs and simplifying trade practices.
- Countries eligible for Special Rupee Vostro Accounts include Bangladesh, Belarus, Botswana, Fiji, Germany, Guyana, Israel, Kazakhstan, Kenya, Malaysia, Maldives, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom.
- The bilateral arrangement between RBI and the Central Bank of UAE is expected to further boost trade relations between India and the UAE.
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