Currency convertibility

International trade can now be settled in rupees as Center changes policy

By Gilbert M. Mills

International trade can now be settled in rupees as government changes policy

After months of deliberation, the Center finally made an amendment to its foreign trade policy to facilitate international trade in the rupee.
The Directorate General of Foreign Trade (DGFT) of the Ministry of Commerce and Industry notified the changes to the policy on Friday.

The amendment to this policy will allow invoicing, payment and settlement of international trade in Indian Rupees.

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The Reserve Bank of India (RBI has authorized Indian banks authorized to open Vostro special accounts in rupees of correspondent banks of any partner trading country to facilitate trading in Indian currency.

Under the arrangement, Indian importers will make payment in rupees to the Vostro special account of the partner country’s bank against invoices for the supply of goods or services from the foreign seller or supplier, as per the trade policy.

Finance Minister Nirmala Sitharaman recently reviewed the rupee swap scheme and asked banks to speed up the process of opening special Vostro rupee accounts.
The Commerce Department has also been asked to reach out to merchants to encourage them to take this route.

The finance minister also said that many countries have shown interest in bilateral rupee trading after the RBI recently announced a mechanism.

Speaking at an event, she said that this, along with other measures taken by the government, was aimed at full capital account convertibility.

“It’s not the ruble-rupee that was in the old format. Now this formulation (of the bilateral rupee trade), which I’m glad the RBI came up at such a critical time,” he said. she said when asked if India was ready for capital account convertibility.

In July, the RBI unveiled a mechanism to settle international trade in rupees to counter the impact of depreciating global currencies.

The move was seen as aimed at promoting trade with Russia, as the country used a similar mechanism to settle payments with Iran, which has also faced sanctions from the West.

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Gilbert M. Mills
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