Rupee inching closer to replacing dollar, 18 countries agree to trade in Indian rupee

The Indian rupee is inching closer to becoming an international currency, as more and more countries work to reduce global trade.

New Delhi: The Indian rupee is inching closer to becoming an international currency, as more and more countries work to decongest global trade. Several countries have expressed interest in facilitating international trade in INR and to smoothen the process, India’s central bank – RBI – has approved the opening of 60 special Rupee Vostro accounts in 18 countries, including Russia and Sri Lanka.

India’s Minister of State for Finance Bhagwat Karad informed Parliament that according to records, India’s central bank – the Reserve Bank of India (RBI) – has “in 60 cases allowed domestic and foreign AD (Authorised Dealer) banks to open banks’ SRVAs”. was approved. To settle payments in Indian Rupees to 18 nations.

The minister further said, among the 18 countries, Russia has been vocal in facilitating trade in local currency for the overall process of “de-dollarization”. He said that India, however, has been supporting the idea of trading in local currency mainly to promote exports.

18 countries allowed to trade in Indian Rupee

The 18 countries that have been allowed to trade in the Indian Rupee are:
1- Russia
2 – Singapore
3 – Sri Lanka
4 – Botswana
5 – Fiji
6 – Germany
7 – Guyana
8 – Israel
9 – Kenya
10 – Malaysia
11 – Mauritius
12 – Myanmar
13 – New Zealand
14 – Oman
15 – Seychelles
16 – Tanzania
17 – Uganda
18 – United Kingdom.

The numbers clearly indicate significant progress in the development of mechanisms to settle international trade in the Indian rupee.
The process of SRVAs started in the month of July last year when RBI issued detailed guidelines on cross border business transactions in Indian Rupee (INR).

India’s central bank said, “It has been decided to put in place an additional arrangement for invoicing, payment and settlement of exports/imports in Indian Rupees.”

To settle trades as per the new mechanism, authorized banks in India are required to open and maintain SRVAs of partner trading country banks.

These accounts hold the foreign entity’s holdings in an Indian bank in Indian Rupees. When an Indian importer makes a payment in rupees to a foreign merchant, the amount is credited to this Vostro account.

Similarly, when an Indian exporter has to pay for goods and services in rupees, the amount will be deducted from this vostro account and credited to the exporter’s regular account.

SRVAs holders are permitted to invest the surplus balance in Government of India securities. This facility is being provided by RBI to help popularize the new system.

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The Indian central bank said, “Indian importers importing through this mechanism shall make payment in INR (Indian Rupees) against the invoice for the supply of goods or services from the overseas seller to a special Vostro account of the correspondent bank of the partner country.” will be deposited.”

India is trying to promote the use of INR for trade deals with other countries after sanctions were imposed by the West and European countries after Russian President Vladimir Putin launched a “special military operation” against Ukraine on February 24, 2022. Used to be.

(with agency inputs)