RBI opens doors for banks from 18 countries to trade in rupee

The Reserve Bank of India (RBI) has authorised banks from 18 countries to open Special Vostro Rupee Accounts (SVRAs) for settling payments in Indian rupees, the government said on Tuesday in the Rajya Sabha.

In answer to a question from the BJP’s Sushil Kumar Modi, Union Minister of State for Finance Bhagwat Kishanrao Karad stated that SVRAs might be established by banks from partner nations by approaching Authorised Dealer (AD) institutions in India, who would then seek authorization from the RBI.

According to Mr. Karad, the RBI approved “domestic and foreign AD Banks in 60 cases for opening SRVAs of banks from 18 nations — Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom.”

Russia has been loud in employing trade in local currency for the general process of “de-dollarisation” of the 18 countries indicated in Mr. Karad’s statement. However, India has backed the idea of trading in local currency in order to encourage exports. In July 2022, the RBI declared that “it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR [Indian rupees].”

The statement came against the backdrop of a commodities crisis precipitated by Western sanctions imposed on Russia following President Vladimir Putin’s start of a so-called “special military operation” against Ukraine on February 24, 2022.

Trade in local currencies has been proposed as a means of avoiding the current wave of wartime international sanctions that is stifling supply chains and global trade flows.

In the recent year, India has signed trade treaties with nations such as the UAE and Australia, and has began talks with others such as the United Kingdom and the European Union, all while making inroads for the national currency in bilateral and global trade.

The RBI has defined procedures for trade in INR in the Circular (No 10 RBI/2022-2023/90 dated 11.07.2022 on ‘International Trade Settlement in Indian Rupees’. The RBI has also posted frequently asked questions on its website. “The RBI has clarified matters related to the operationalization of SRVAs through the aforementioned FAQs, which are available to banks, importers and exporters, and so on,” Mr. Karad noted in the Rajya Sabha.