New Delhi:- The popularity of the Indian rupee in international trade is on the rise. Since the Reserve Bank of India issued guidelines on cross-border trade transactions in Indian rupees in July last year, 18 countries across the world are considering doing business with India in rupees. Due to this increasing trend of Indian rupee it can be given the status of international currency.
Until now, the dollar has been a major part of global trade and most countries in the world use the dollar to buy and sell goods with each other. Many countries of the world have taken interest in using rupee for international trade and have tried to simplify the process of its settlement.
The Reserve Bank of India has recently approved the creation of 60 special Vostro accounts. International trade will be possible in rupees from countries like Russia and Sri Lanka. India’s Minister of State for Finance Bhagwat Karad has told the Parliament that the Reserve Bank of India has approved the opening of Vostro accounts as domestic and foreign ADs.
India moving towards foreign trade in rupees
The minister further said that 18 countries have opened special Vostro accounts in India. Among them, Russia has been very vocal about doing business in the local currency. Also said that India has always supported exports in rupees.
These countries have opened SRVA in India
The Finance Minister said that India has prepared several schemes to promote trade in local currency to increase exports. Countries that have shown interest in trading with India in rupees include Russia, Singapore, Sri Lanka, Botswana, Fiji, Israel, Kenya, Malaysia, Mauritius, New Zealand, Oman and the UK.
There will be profit in foreign trade in rupees
In the last few years, the machinery for settling international trade in Indian rupee is developing rapidly and 18 countries of the world are taking interest in it, this shows that the risk of rupee is increasing continuously. 8 countries of the world have opened 50 special Vostro accounts in the last 6 months. Countries doing this type of business can open a Vostro account in India with an authorized bank under the new machinery type and do business with their home country’s bank.
Trading in rupee will reduce India’s dependence on foreign currencies like dollar. Along with this, the effect of sudden global upheaval will be less on the country’s economy. This will provide an opportunity to Indian banks to do business in major international markets.
What is Special Rupee Vostro Account or SRVA?
In July last year, the RBI issued guidelines for opening a special Vostro account. A special Rupee Vostro account is required for any country to trade with India in rupees. This allows domestic banks to do business in the local currency of other countries.
Vostro account is an account maintained by domestic banks for foreign banks in domestic currency.
It allows domestic banks to provide international banking services to their customers.
SRVA is an addition to this existing system which uses freely convertible currencies and works as a complimentary system.
This will reduce the dependence on hard (freely convertible) currency.
Unlike Vostro account, SRVA requires prior approval of RBI before opening.
The balance in SRVA is like foreign exchange inflows converted into Indian Rupees, the balance can be used for any permitted current and capital account transactions under the current FEMA framework.
Normal Vostro accounts only function as transit accounts, while balances can be held in special Vostro accounts.