RBI announces measures for the settlement of international trade in rupees

Last update: July 11, 2022, 7:15 p.m. HST

The Reserve Bank on Monday asked banks to put in place additional provisions for export and import transactions in Indian rupees. (Image: Shutterstock)

Before setting up this mechanism, banks will have to obtain prior approval from the Foreign Exchange Department of the Reserve Bank of India (RBI), the central bank said in a circular.

Mumbai: The Reserve Bank on Monday asked banks to put in place additional provisions for export and import transactions in Indian rupees in view of the growing interest of the global trading community in the national currency. Before setting up this mechanism, banks will have to obtain prior approval from the Foreign Exchange Department of the Reserve Bank of India (RBI), the central bank said in a circular.

“In order to promote the growth of global trade with a focus on exports from India and to support the growing interest of the global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment and settlement of exports/imports in INR,” he said. For the settlement of trade transactions, the relevant banks will need special Vostro Rupee accounts from the correspondent bank(s) of the trading partner country.

“Indian importers who undertake imports through this mechanism must make payment in INR which will be credited to the Vostro special account of the correspondent bank of the partner country, against the invoices for the supply of goods or services of the seller / supplier stranger,” he said. Exporters who undertake shipments of goods and services abroad through this mechanism will receive the export proceeds in Indian Rupees from the balances of the designated Vostro Special Account.

This mechanism can enable Indian exporters to receive an advance payment in rupees on exports from foreign importers. In accordance with the circular, the excess rupee balance held may be used for permitted capital and current account transactions as mutually agreed.

The balance of special vostro accounts can be used for project and investment payments; management of anticipated export/import flows; and investing in government bonds.

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