Banks from these 18 nations will need to contact authorized dealer (AD) banks in India,
according to Union Minister of State for Finance Bhagwat Karad. After following the proper protocol, these AD banks will request authorization from the RBI to open such an account.
Banks from 18 different nations can now open Special Vostro Rupee Accounts (SVRA) and
settle transactions using Indian rupees thanks to a license from the Reserve Bank of India (RBI). A top government official said on Wednesday that several banks, including HDFC Bank and
UCO Bank, had opened up to 30 special Vostro accounts to date in order to enable rupee trade abroad. Earlier this week, the Indian administration informed the parliament of this. Fiji,
Botswana, Guyana, Germany, Kenya, Israel, Malaysia, Mauritius, Myanmar, New Zealand,
Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom are among the 18 nations. Bhagwat Karad, the Union Minister of State for Finance, responded to a query by saying that banks from these 18 nations must contact authorized dealer (AD) banks in India, who will request authorization from the RBI for the opening of such an account after following the proper procedure.
The Special Vostro Rupee Accounts (SVRAs) and India:
When the RBI declared in July 2022 that “it has been determined to put in place an
An additional mechanism for invoicing, payment, and settlement of exports/imports in INR [Indian rupees],” the SVRA procedure got underway.The declaration came against the backdrop of the commodities crisis created by the Western sanctions against Russia when President Vladimir Putin initiated the “special military operation” against Ukraine in February 2022.
Trading in local currencies has been suggested as an alternative to the current wave of international sanctions imposed during times of war, which are impeding supply chains and international trade flows.
What is a Vostro Account?
An account held by local banks in their home currency, in this case, the rupee, for international banks is known as a Vostro account. Domestic banks use it to offer international banking services to their customers who have needs for international banking. The SRVA is a separate arrangement that uses freely convertible currencies and functions as an adjunct to the current system.For commerce to be facilitated by the current systems, positions and balances in such currencies as the US dollar and the pound must be maintained.
The decision was made against the backdrop of the post-Ukraine War commodity crisis. Sanctions imposed during the war have been proposed to be overcome by trade in local currencies.
The RBI has allowed the special Vostro accounts to invest the surplus balance in Indian government securities in order to raise awareness of the new structure.
The RBI and the finance ministry asked the senior bank executives and representatives of trade associations to encourage export and import transactions in the rupee last year. They want banks in India to connect with their overseas counterparts and open unique rupee Vostro accounts in order to promote cross-border trade in the rupee as opposed to the more prevalent US dollar.
Commerce Secretary Sunil Barthwal responded that payments are being made through regular banking channels and that energy commerce from Russia is not affected by sanctions when asked about the foreign currency in which India is paying Russia for oil.
Payments can be made in yuan as well as other currencies like the euro, dollar, and dirham, according to Sarangi.
It will be in any convertible currency, according to Barthwal.
In its circular No. 10 RBI/2022-2023/90, dated July 11, 2022, titled “International Trade Settlement in Indian Rupees,” the RBI described the procedures for dealing in INR. Moreover, RBI has Questions posted on its website. The RBI has addressed concerns related to the operationalization of SRVAs with the aforementioned FAQs, which are accessible to banks, importers, exporters, etc., Mr. Karad said in the Rajya Sabha.