Earlier last week, on Tuesday, the Indian Government informed the Rajya Sabha that the Reserve Bank of India(RBI) allowed 18 countries to open Special Vostro Rupee Accounts (SVRAs) and use Indian rupees to settle payments.
These 18 countries are Fiji, Seychelles, Botswana, Uganda, Guyana, Kenya, Tanzania, the United Kingdom, Germany, Israel, Oman, Russia, Sri Lanka, Malaysia, and Singapore.
Union Minister of State for Finance Bhagwat Kishanrao Karad said that banks from these 18 counties have to contact the authorised dealer of banks in India. They will further approach the RBI and request their approval to open accounts.
SVRAs, or Special Vostro Rupee Accounts, are not just a complementary settlement to the Vostro account. They represent a tailored system designed to meet the specific banking service needs of foreign banks in Indian rupees, thereby expanding the scope of international trade.
Typically, Vostro accounts maintain balances and settlements in dollars. However, the' de-dollarisation' concept, popularised by Russia, advocates using local currency in banking transactions with other countries. This arrangement, adopted by India, primarily aims to boost exports and ensure an unhindered process. The benefits of 'de-dollarisation' are manifold, including smoother supply chains, efficient exports and imports, and seamless goods trading.
The process commenced in July 2022 when the RBI declared it would arrange a unique method for payment and settlement of imports and exports in Indian rupees with the listed countries for trading. This announcement is also crucial in the context of the Russia-Ukraine War. President Vladimir Putin declared war on Ukraine and planned a swift invasion in February 2022. This led to the putting up of Western Sanctions against Russia, resulting in a commodities crisis.
It is observed that the implication of using a local currency rather than a dollar(US currency) is beneficial for a smooth supply of chains, exports, imports, and goods. It helps to ease the process of trading and money-dealing, especially during the present surge of wars in some areas of the globe.
Circular no 10, dated 11.07.2022, has been issued by RBI on 'International Trade Settlement in Indian Rupees.' RBI has also solved several queries regarding the policy by posting FAQs on its website.