NEW DELHI: After Russia, India is in talks with the UAE and Saudi Arabia to allow settlement of trade in the Indian rupee, according to sources. The Reserve Bank of India and the finance ministry are working on the framework to permit trade in the Indian currency.
“The UAE is a big market for India, so obviously the traders in the country will benefit from this move. Similarly, Saudi Arabia is a significant trading partner of India. However, the problem lies in the fact that we are a net importer from both these countries, so the excess rupee management can be an issue,” a top government source told this newspaper. According to the commerce ministry data, India’s exports to the UAE and Saudi Arabia recorded a drop in October 2022.
“Rupee trade settlement should be independent of currency fluctuation vis-a-vis the dollar and it is good to internationalise the rupee. The RBI and finance ministry are working on its framework,” the official further stated.
Vostro account maintains holdings of the foreign entity in Indian banks in rupee. So, traders whether importers or exporters can receive or make payments through this account. Meanwhile, as per international news agencies, RBI has given its approval to HDFC Bank and Canara Bank to open special Vostro accounts for trade settlement in Indian currency with Russia.
The other three banks which got approval to open Vostro accounts are UCO Bank, Union Bank and IndusInd Bank. Besides this, two Russian banks have the central bank’s permission, which is Sber Bank and VTB. Both these banks have branches in India. These two Russian banks are the first foreign lenders to have RBI’s approval to open special Vostro accounts to trade in rupees.
The RBI in July this year announced to allow trade settlements between India and other countries in rupee. It issued the notification on July 11, which said, “In order to promote the growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in INR, it has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR.”
Canara, HDFC get RBI nod to open Vostro account
RBI has given its approval to HDFC Bank and Canara Bank to open special Vostro accounts for trade settlement in Indian currency with Russia. The other three banks which got approval to open Vostro accounts are UCO Bank, Union Bank and IndusInd Bank. Two Russian banks have the central bank’s permission, which is Sber Bank VTB