The Reserve Bank of India (RBI) has launched measures to promote the rupee as the preferred currency for international trade settlement which will boost exports, Finance Minister Nirmala Sitharaman said on Monday.
On July 11, the central bank authorized settlement of exports and imports in rupees to enhance trade flows.
In a written response to Lok Sabha, Sitharaman said, “RBI has put in place the arrangement for Invoicing, Payment and Settlement of Exports/Imports in Rupees to promote the growth of global trade with emphasis on India’s exports and to support the global trading community’s growing interest in the rupee.
She said the central bank notified the new agreement to promote trade growth by reducing dependence on hard currencies, emphasizing India’s exports and supporting growing interest in the global trading community for the rupee.
The exporters previously told FE that the move would boost trade not only with Russia, but also with other sanctioned countries like Iran. The mechanism could also be leveraged to trade with Sri Lanka and African countries that face currency issues, some said. It is also a necessary step towards full rupee convertibility, they added.
For the settlement of trade transactions, the relevant banks will require special Vostro rupee accounts from the correspondent banks of the trading partner. “Indian importers who undertake imports through this mechanism must make payment in rupees which will be credited to the Vostro special account of the correspondent bank of the partner country, against the invoices for the supply of goods or services of the seller / supplier foreign,” the RBI said.
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