The Reserve Bank of India (RBI) has approved 60 requests to open Special Rupee Vostro Accounts (SRVAs) of correspondent banks from 18 countries, Finance Ministry informed Lok Sabha on Tuesday. These countries include the UK, Singapore, and New Zealand beside others.
Last July, RBI allowed invoicing and payments for international trade in Indian Rupee. It put in place the arrangement to promote global trade growth with emphasis on exports from India and to support the increasing interest of the global trading community in Indian rupee (INR). A framework has been put in place by RBI and it is applicable for any partner country seeking to undertake trade with India in INR.
The approval process for opening SRVAs is banks of partner countries may approach Authorised Dealer (AD) banks in India which may seek approval from RBI with details of the arrangement.
In a written response, Minister of State for Finance Bhagwat Karad said, “Approvals have been granted by RBI to domestic and foreign AD Banks in 60 cases for the opening of Special Rupee Vostro Accounts (SRVAs) of correspondent banks from 18 countries, namely Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and United Kingdom.”
According to RBI, the settlement of International trade through INR is an additional arrangement to the existing system of settlement. SRVA requires prior approval before opening unlike Rupee Vostro account. The settlement through INR is an additional arrangement to the existing system that uses freely convertible currencies and works as a complimentary system. This will reduce dependence on hard (freely convertible) currency.
The exchange rate for most currencies is determined in the Forex markets, typically against global currencies like the USD, EUR, JPY, etc. In the transition phase, when there is no market with direct exchange rates between two currencies (say INR and Sri Lankan Rupee), the exchange rate between the currencies of two trading partner countries, each of which has markets against global currencies, would be derived as a cross currency rate.
The policy is not aimed at any specific country. This step is part of a sequenced and calibrated path for increased use of the INR in international transactions, the central bank said in frequently asked questions (FAQs).
Further, it said that the balance in SRVA can be repatriated in freely convertible currency and/or currency of the beneficiary trading partner country depending on the underlying transaction i.e. for which the account was credited. For example, for import payments through SRVA, the fund can be remitted to overseas exporters either in freely convertible currency or in the domestic currency of the overseas exporter. The income from INR balance can also be repatriated subject to applicable regulatory guidelines and tax provisions.
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