After facilitating rupee trade with Russia, Mauritius, and Sri Lanka, the government has reportedly invited banks and trade associations to look at similar prospects with more countries.
The rupee trade agreement has already been put into effect by Indian banks opening Special Vostro Rupee Accounts (SVRA) with banks in these three countries.
Recently, an SVRA with the State Bank of India was opened by SBI Mauritius Ltd. and People’s Bank of Sri Lanka (SBI). In addition, the Bank of Ceylon opened a bank account in Chennai, the location of its Indian affiliate.
Union Bank of India opened a special rupee account for Ros Bank Russia, while Indian Bank, based in Chennai, opened similar accounts for three Sri Lankan banks, including NDB Bank and Seylan Bank, all of which have offices in Colombo.
Eleven banks, including two from Russia and one from Sri Lanka, created a total of 18 such special rupee accounts after receiving permission from the Reserve Bank of India (RBI). In July, the RBI released comprehensive guidelines for domestic currency cross-border trade operations.
According to reports, the finance ministry encouraged stakeholders to consider more nations and set up this mechanism during a recent review conference, as part of its ambitions to increase bilateral trade through SVRAs and internationalise native payment methods.
India has been attempting to encourage rupee commerce in the wake of the Russia-Ukraine war and the Western sanctions. The opening of the Special Vostro account clears the way for rupee payments to be settled for trade between India and Russia, facilitating cross-border trade in the Indian rupee, which the RBI is eager to promote.
To spread awareness of the new structure, the RBI has permitted the Special Vostro accounts to invest the surplus balance in Indian government securities.
According to the RBI, “Indian importers who use this mechanism for imports shall make payment in INR (Indian Rupee) against the invoices for the supply of goods or services from the overseas seller or supplier, which shall be credited into the Special Vostro account of the correspondent bank of the partner country.”