In an effort to establish the rupee as a global currency, banks are reportedly considering starting trade with Bangladesh and African nations like Egypt. The external sector would be protected from exchange market fluctuations by international trading in rupees.
In the most recent fiscal year, India purchased items worth USD 3,520.83 million from Egypt, USD 1,004.24 million from Algeria, and USD 2,725.08 million from Angola.
According to information released by the trade ministry, Bangladesh imported USD 1,977.93 million worth of goods from its neighbouring countries in the previous year.
Currently rupee trade arrangements are with Russia, Mauritius and Sri Lanka through Special Rupee Vostro Account (SRVA).
Indian banks have already opened SRVA with banks of these three nations, operationalising the rupee trade arrangement.
Following permission from the Reserve Bank of India, 11 banks, including two from Russia and one from Sri Lanka, created a total of 18 such special rupee accounts (RBI). In July, the RBI released comprehensive guidelines for domestic currency cross-border trade operations.
According to reports, the finance ministry encouraged stakeholders to consider more nations and set up this mechanism during a recent review conference with stakeholders as part of its ambitions to increase bilateral trade through SVRAs and internationalise native payment methods.
After the Russia-Ukraine war and the sanctions imposed by the West, India has been trying to promote rupee trade.
Since the RBI released the rules in July, two major Russian banks, Sberbank and VTB Bank, are the first international lenders to be approved.
In accordance with the guidelines, the RBI made the decision to implement a new system for rupee-based export/import invoicing, payment, and settlement.
The opening of the special vostro account clears the way for rupee payments to be settled for commerce between India and Russia, facilitating cross-border trade in the Indian rupee, which the RBI is eager to promote.
To spread awareness of the new structure, the RBI has permitted the special vostro accounts to invest the surplus balance in Indian government securities.
According to the RBI, “Indian importers who use this mechanism for imports shall make payment in INR (Indian Rupee) against the invoices for the supply of goods or services from the overseas seller/supplier, which shall be credited into the special vostro account of the correspondent bank of the partner country.”
