(9 November 2022 – India) The Reserve Bank of India (RBI) announced guidelines on overseas trade in Indian Rupee aimed at curtailing India’s US Dollar dependence for trade and indirectly strengthen the domestic Indian Rupee (INR) currency.
On the lines of an arrangement being tabled with Russia, India is in talks with Sri Lanka, the Maldives and multiple South East Asian, African and Latin American countries to initiate trading in the Indian Rupee. The first country to open a special Rupee Vostro account is Russia which has increased the supply of discounted crude oil to India post the Ukraine war.
Under the INR arrangement, banks in India will open Vostro accounts (an account that an Indian bank will hold on behalf of another bank) of correspondent bank/s of the partner country for trading. Indian importers can pay for their imports in rupees into these accounts. These earnings from Indian imports can then be used to pay Indian exporters in Indian Rupee. Unlike regular Vostro accounts, INR (Indian Rupee) balances can be held in these Special Vostro Accounts rather than them being only transit accounts like normal Vostro accounts.
Any rupee trade arrangement between India and a country which has a trade deficit with India, may not be feasible in the long run. Russia is an exception in this case since the country is under sanctions and could use the Indian rupee to invest here to fulfil their offset obligations under defence contracts.
“Given the rise in interest in internationalisation of Indian Rupee, the given Policy amendments have been undertaken to facilitate and to bring ease in international trade transactions in Indian Rupees,” India’s Ministry of Commerce & Industry said in a statement.