Several countries willing to settle trade in Indian Rupee as it cuts transaction cost: Commerce Min Piyush Goyal

New Delhi: Several countries are in talks with India's central bank, RBI, to facilitate overseas trade in Indian rupee as it helps cut transaction cost, said Commerce and Industry Minister Piyush Goyal.

The Commerce Minister of India further said, gradually countries have been realising that there is need to change in currency for transaction as settling trade in US dollar and Euro involves a conversion cost, which in turn increase overall amount.

So far, 18 countries have opened Special Vostro Rupee Accounts (SVRAs) to settle trade in INR. These countries are -- Malaysia, Mauritius, Myanmar, United Kingdom, Russia, New Zealand, Sri Lanka, Oman, Seychelles, Singapore, Tanzania, Uganda, Botswana, Fiji, Germany, Guyana, Israel, and Kenya.

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"We can address these issues through rupee trade (arrangement)," Goyal said.

In July last year, the Reserve Bank of India (RBI) and the country's Finance Ministry asked the top managements of banks and representatives of trade bodies to push import and export transactions in the Indian rupee.

Banks in India were asked to connect with their foreign counterparts for opening SVRAs to facilitate trade in INR rather than dollar.

Indian banks, including HDFC, UCO have opened SVRAs to facilitate other countries to settle cross-border trade in the rupee.

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What is Special Rupee Vostro Account?

To settle trade in INR, authorised banks in India are required to open and maintain SRVAs of the partner trading country’s banks.

These accounts keep the foreign entity’s holding in the Indian bank in the rupee. When an Indian importer makes payment to trader of another country in rupees, the amount gets credited to this vostro account.

Similarly, when an Indian exporter has to be paid for goods and services in INR, amount from this vostro account will be deducted and credited to the exporter’s regular account.

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The SRVAs holders are allowed to invest surplus balance in Indian government securities. This facility is being provided by the RBI to help popularise the new arrangement.

For opening SRVA, prior approval of RBI is mandatory.

SRVA is different from the already existing Rupee Vostro Account provided for under Foreign Exchange Management (Deposit) Regulations, 2016, as it required prior approval of the RBI before opening.

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