new Delhi: Sources said banks are looking at the possibility of starting rupee trade with African countries like Bangladesh and Egypt as part of the exercise to make the rupee an international currency. Foreign trade in rupees will insulate the overseas sector from fluctuations in the foreign exchange market. India imported goods worth USD 3,520.83 million 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, last year’s imports from the neighboring country stood at USD 1,977.93 million, according to data provided by the commerce ministry. Presently the rupee trade arrangement with Russia, Mauritius and Sri Lanka is through the Special Rupee Vostro Account (SRVA). Indian banks have already opened SRVAs with banks of these three countries, thereby operating the rupee trading arrangement. Recently, SBI Mauritius Limited and People’s Bank of Sri Lanka opened an SRVA with State Bank of India (SBI). In addition, Bank of Ceylon opened an account with its Indian subsidiary in Chennai.
Union Bank of India has opened a special rupee account of Rosbank Russia, while Chennai-based Indian Bank has opened such accounts of three Sri Lankan banks including Colombo-based NDB Bank and Ceylan Bank. A total of 18 such special rupee accounts have been opened by 11 banks, including two from Russia and one from Sri Lanka, after approval from the Reserve Bank of India (RBI). The RBI in July issued detailed guidelines on cross-border business transactions in domestic currency.
Sources said that in a recent review meeting with the stakeholders, the Finance Ministry has asked the stakeholders to explore more countries as part of its plans to expand bilateral trade through SVRA and internationalize indigenous payment modes asked to set up the system. After the Russia-Ukraine war and sanctions imposed by the West, India has been trying to boost rupee trade. Since July, two major Russian banks Sberbank and VTB Bank are the first foreign lenders to receive approval after the RBI announced the guidelines. RBI decided to put in place an additional mechanism for invoicing, payment and settlement of exports/imports in rupees, as per the guidelines.
Another Russian bank Gazprombank, which does not have a branch in India, has also opened this account in Kolkata-based UCO Bank. The move to open the special Vostro account cleared the decks for settlement of payments in rupees for trade between India and Russia, thereby enabling cross-border trade in the Indian currency, which the RBI seeks to promote. The Reserve Bank of India has allowed special Vostro accounts to invest surplus balances in Government of India securities to help popularize the new system.
“The Indian importer importing through this mechanism shall make payment in INR (Indian Rupees) which shall be credited to the special Vostro account of the correspondent bank of the partner country against the invoice for the supply of goods or services from the overseas seller/supplier. RBI had said.