New Delhi: Banks are considering starting rupee trade with Bangladesh and African countries such as Egypt as part of the exercise to make the rupee an international currency, the sources said. Foreign trade in rupees would protect the external sector from fluctuations in the foreign exchange market. India imported USD 3,520.83 million worth of goods from Egypt, USD 1,004.24 million from Algeria and USD 2,725.08 million from Angola in the last financial year.
As far as Bangladesh is concerned, imports in the last year from the neighboring country stood at USD 1,977.93 million, according to data provided by the Ministry of Commerce. Currently, rupee trade deals are with Russia, Mauritius and Sri Lanka through the Vostro Special Rupee Account (SRVA). Indian banks have already opened SRVA with banks from these three nations, putting the rupee trade deal into operation. Recently, SBI Mauritius Ltd and the People’s Bank of Sri Lanka opened an SRVA with the State Bank of India (SBI). In addition, Bank of Ceylon opened an account at its Indian branch in Chennai.
Union Bank of India opened a special rupee account with Ros Bank Russia, while Chennai-based Indian Bank opened accounts with three Sri Lankan banks, including Colombo-based NDB Bank and Seylan Bank. In total, 11 such banks have opened 18 special rupee accounts, including two from Russia and one from Sri Lanka, following approval by the Reserve Bank of India (RBI). The RBI issued detailed guidelines on cross-border business transactions in national currency in July.
In a recent review meeting with stakeholders, the sources said, the Finance Ministry asked stakeholders to explore more countries and establish this mechanism as part of its plans to expand bilateral trade through SVRA and internationalize modes of native payment. Following the war between Russia and Ukraine and the sanctions imposed by the West, India has been trying to promote the rupee trade. Since July, two leading Russian banks, Sberbank and VTB Bank, are the first foreign lenders to receive approval after the RBI announced the guidelines. The RBI, in accordance with the guidelines, decided to implement an additional arrangement for billing, payment and settlement of exports/imports in rupee.
Another Russian bank, Gazprombank, which has no branch in India, also opened this account with Kolkata-based UCO Bank. The move to open the special vostro account clears the covers for the settlement of rupee payments for India-Russia trade, allowing cross-border trade in the Indian currency, which the RBI wishes to promote. The RBI has allowed special vostro accounts to invest the excess balance in Indian government securities to help popularize the new deal.
“Indian importers importing through this mechanism will be required to make payments in INR (Indian Rupees), which will be credited to the special vostro account of the partner country’s correspondent bank, against invoices for the supply of goods or services from the foreign seller. ./supplier,” the RBI had said.
