The Reserve Bank requested banks to make additional provisions for export and import operations in Indian rupees on Monday in light of the growing interest in the local currency among the world’s traders.Banks will need prior approval from the Reserve Bank of India’s (RBI) Foreign Exchange Department before using this method, the central bank stated in a circular.
In an official release, the RBI said: “In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in rupee, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in rupee.”
“Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier,” the circular further stated.
All exports and imports under this arrangement may be denominated and invoiced in rupee.
The involved banks will need Special Rupee Vostro Accounts of correspondent bank(s) of the trading partner countries to settle trade transactions.
The funds in the designated Special Vostro account will be used to pay exporters who use this system to send products and services overseas in Indian rupees. Through this arrangement, Indian exporters might be able to get rupee-based advance payments from foreign importers against their products.
The circular states that the maintained rupee surplus balance may be applied to mutually agreed-upon authorised capital and current account operations.The remaining funds in special vostro accounts can be used to fund investments, manage export/import advance flows, and purchase government bonds.
Prior to approving the acceptance of advance payments against exports, banks must make sure that the funds in these accounts are first used to fulfil payment commitments resulting from recently completed export orders and upcoming export payments.
