RBI Introduces International Trade Settlement in Indian Rupees 

RBI Introduces International Trade Settlement in Indian Rupees 

  • The Reserve Bank of India (RBI) has come out with an alternative payment mechanism which allows cross border trade transactions in Indian Rupee (INR). Through this measure, RBI aims towards liberalisation of capital account convertibility.
  • This additional arrangements for invoicing, payment, and settlement of exports/ imports in the domestic currency will promote growth of global trade with focus on exports from India.
  • The mechanism will also cut the risk of forex fluctuation, because the demand for foreign exchange in case of import will not be there.

Trade Transaction Settlement Mechanism

  • For settlement of trade transactions in domestic currency, the authorised dealer (AD) banks in India will require Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country.
  • In case of import, Indian importers will make payment in the rupee which shall be credited into the special vostro account of the correspondent bank of the partner country.
  • Similarly, in case of export, Indian exporters shall be paid the export proceeds in rupee from the balances in the designated special vostro account of the correspondent bank of the partner country.

Additional data

  • This new framework for cross border trade transactions in INR is under Foreign Exchange Management Act, 1999 (FEMA).
  • The new mechanism is open for all Category-I Authorised Dealer Banks. However, they shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai, before putting into place this mechanism.

Source: RBI

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