Background:
Ever since sanctions were imposed on Russia by US and Europe during the Russo-Ukrainian War, trade has been virtually at standstill with the country due to payment problems. India is highly dependent on Russia for the supply of crude oil and weaponry. To continue trade with Russia and to promote global trade with emphasis on exports from India and to strengthen the Indian Currency, RBI has allowed International Settlement of Trade in INR for export and / or import of goods and services.
Key Points:
The Practice of Export invoicing in INR is already existing however, the payment must come through Vostro Accounts maintained by foreign banks with a bank in India. A vostro account is an account that domestic banks hold for foreign banks in the former’s domestic currency, in this case, the rupee.
AD bank in India may open Special Rupee Vostro Accounts (SRVA) of correspondent bank/s of the partner trading country to allow settlement of international trade transactions through this arrangement.
Indian importers shall make payment in INR which shall be credited to special vostro account of correspondent bank of partner country, against invoice for supply of goods or services from the overseas supplier / seller.
b. Indian exporters, shall be paid export proceeds in INR from the balances in the designated vostro account of the correspondent bank of the partner country.
The bank of a foreign country may approach an India Bank for opening of Special INR Vostro account. The foreign bank will first seek approval from the Reserve Bank. When an Indian importer wants to make a payment to a foreign trader in rupees, the amount will be credited to this Vostro account.
Similarly, when an Indian exporter has to be paid for goods and services in rupees, this Vostro account will be deducted, and amount credited to the exporter’s regular account.
The amount may be credited or debited in the Vostro Account of the foreign bank and that amount shall not be available for withdrawal by the foreign banks. Export receivables shall be adjusted against the balance amount in Vostro Account.
The balance in Special Rupee Vostro Account (SRVA) can be repatriated in freely convertible currency
and / or currency of the beneficiary trading partner country subject to applicable regulatory guidelines
and tax provisions.
The export/import undertaken and settled in INR transactions manner shall be subject to usual documentation and reporting requirements.
RBI has given permission to banks from 18 countries to open Special Vostro Rupee Accounts (SVRA)
and use Indian rupees to settle payments. These 18 nations include:
| Botswana, | Malaysia, | Seychelles, |
| Fiji, | Mauritius, | Singapore, |
| Germany, | Myanmar, | Sri Lanka, |
| Guyana, | New Zealand, | Tanzania, |
| Israel, | Oman, | Uganda and |
| Kenya, | Russia, | United Kingdom |
SW Point of View:
This mechanism will ease India’s hard currency outflow substantially and strengthen Rupee. The dependency on US dollar will be reduced and will gradually contribute to the global acceptance of rupees for international trade transactions.
