Mumbai : The Reserve Bank of India (RBI) on Monday said it has allowed international trade settlement in rupees, a move aimed at settling export and import with Russia, Sri Lanka and others.
The move by RBI comes amid increasing pressure on the Indian currency in the wake of Russia’s invasion of Ukraine.
“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” RBI said in a circular.
Before putting in place this mechanism, Authorised Dealer (AD) banks will require prior approval from the Foreign Exchange Department of Reserve Bank of India, it added.
All exports and imports under this arrangement may be denominated and invoiced in Rupee (INR). Exchange rate between the currencies of the two trading partner countries may be market determined. The settlement of trade transactions under this arrangement shall take place in INR.
AD banks in India have been permitted to open Rupee Vostro Accounts. Accordingly, for settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country.
“Indian importers undertaking imports through this mechanism will 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. Indian exporters, undertaking exports of goods and services through this mechanism, will be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country” RBI said.