The Reserve Bank of India (RBI) has allowed trade settlement between India and other nations in rupees: a move aimed at settling export and import with Russia, Sri Lanka and others.
“In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of 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,” said RBI in a notification on Monday.
Banks have to take RBI’s approval to have a mechanism for dealing in such transactions. “Exchange rate between the currencies of the two trading partner countries may be market determined,” said the central bank.
According to central banking sources, this is one of the ways in which trade can be settled with countries facing Western sanctions.
Banks in India have been permitted to open Rupee Vostro Accounts. RBI has said for settlement of trade transactions with any country, banks in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country.
“Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier,” RBI said.
Indian exporters, undertaking exports of goods and services through this mechanism, should be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country, the notification said.