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Source: The post is based on the article “RBI has allowed banks from 18 countries to trade in rupee: government in Rajya Sabha” published in The Hindu on 15th March 2023
What is the News?
The Reserve Bank of India(RBI) has granted approvals to banks from 18 countries to open Special Rupee Vostro Accounts to settle international trade in rupees.
What are Special Rupee Vostro Accounts(SRVA)?
When did the Special Rupee Vostro Accounts(SRVA) arrangement start?
The process of SVRAs began in July 2022 when the RBI announced that it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR [Indian rupees].
The announcement came against the backdrop of the commodities crisis triggered by the Western sanctions against Russia.
Under the framework, all exports and imports may be denominated and invoiced in rupees, with the exchange rate between the currencies of the two trading partner countries to be market determined.
To settle these trade transactions, authorized Indian banks have to open Special Rupee Vostro accounts of correspondent banks of the partner trading country.
What are the benefits of SRVA arrangement?
Firstly, it would promote the growth of global trade and support increasing international interest in the rupee.
Secondly, it will help India bypass sanctions that prevent the use of a global currency such as the US dollar for trade with certain countries.