The Reserve Bank of India (RBI) allowed HDFC Bank Ltd. and Canara Bank Ltd. to open Vostro accounts for carrying out trade in Rupees with Russia.
This new process for settling international trade in the national currency has been introduced and would ensure the invoicing, trade, and settlement of payments, in rupees. It would also restrict the outflow of dollars, at a time when the rupee value is constantly depreciating.
What are Vostro Accounts?
The accounts that a bank holds on behalf of another bank, usually a foreign bank, which forms a vital part of correspondent banking, are termed Vostro accounts.
This is the mechanism for trade at an international level and has been introduced by the RBI, in order to promote exports and facilitate imports.
This trading process was seen as an aiding business tie with Russia, in case of more stringent western sanctions against Moscow, over its invasion of Ukraine.
The decision to open the special Vostro accounts would lead to the settlement of payment in rupees, for trade happening between India and Russia.
This would also be helpful in cross-border transactions in the Indian currency, Rupees.
Other Vostro accounts in Indian banks:
Earlier 9 special Vostro accounts were opened with 2 Indian banks, with the permission of the RBI, in order to facilitate overseas trade in Indian rupees.
First foreign banks that got approval for overseas trade in rupees in India:
Russia’s largest bank, Sberbank, and the second largest bank, VTB, were the first foreign banks to get approval for performing overseas trade in India.
This approval came soon after the BBI announced the guidelines for overseas trade in the Indian currency in the month of July.
Gazprom, another Russian bank, which does not have its branches in India, has opened Vostro accounts with UCO Bank, based in the city of Kolkata.
Sunil Barthwal, the Commerce Secretary, while releasing the trade data, stated “nine accounts have been opened. One in UCO Bank, one in Sber, one in VTB, and six with IndusInd Bank. These are six different Russian banks”.
These special Vostro accounts are allowed by the RBI to invest the surplus balance in the securities of the Indian government, and thus help popularize the new arrangements.
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