NEW DELHI: In a very bold move to promote trade in Indian currency, the Reserve Bank of India (RBI) on Monday unveiled a rupee settlement system for international trade. The RBI’s move, which analysts say would make the Indian currency more tradable globally and lessen dependence on US dollar, has been hailed as progressive.
Under the new arrangement, authorised dealer (AD) banks in India may open special rupee accounts of correspondent banks of the partner trading country, in order to allow settlement of international trade transactions through this arrangement. However, AD banks will have to take prior permission from the foreign exchange department of RBI, before putting the mechanism to use.
The export/import undertaken and settled in this manner will be subject to usual documentation and reporting requirements. “…. the above instructions shall come into force with immediate effect. AD banks may bring the contents of this circular to the notice of their constituents and customers concern,” an RBI notification said on Monday.
As per the notification, Indian exporters may receive advance payment against exports from overseas importers in rupee through the payment mechanism. Also, rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement, the notification stated. Abhishek Goenka, founder & CEO of IFA Global, said,
“This would make rupee more tradable globally in offshore centers.. It’s a step towards making the Rupee an international 24*7 traded currency. Acceptance of the Rupee will go up. It will also undermine the use of the dollar in the longer term.”
Vijay Kalantri, Chairman, MVIRDC World Trade Center, Mumbai, said, “RBI’s move to promote invoicing of our foreign trade in Indian rupee is a progressive step to internationalize our local currency. This will reduce India’s demand for dollars and thereby reduce depreciation pressure on our currency.