RBI move set to push rupee as global currency
With new measures coming in place, banks will require prior approval from the Foreign Exchange Department of the RBI; Exim payments/receipts will be made via Special Rupee Vostro Accounts of correspondent bank of the partner trading country
Atmanirbhar In Forex Deals
- New mechanism enables Indian exporters to receive advance payment against exports from overseas importers in rupees
- Rupee surplus balance held can be used for permissible capital and current account transactions
- The balance in special vostro accounts can be used for payments for projects and investments
Mumbai: Reserve Bank of India (RBI) on Monday asked banks to put in place additional arrangements for export and import transactions in Indian rupees in view of increasing interest of the global trading community in the domestic currency. Experts say it's a step towards internationalisation of rupee.
Before putting in place this mechanism, banks will require prior approval from the Foreign Exchange Department of the RBI, the central bank said in a circular.
"In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR," it said.
For settlement of trade transactions, the concerned banks will require Special Rupee Vostro Accounts of correspondent bank of the partner trading country.
Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices.
Talking to Bizz Buzz, Abhishek Goenka, founder and CEO IFA Global, said: "It's a good move. This would make the rupee more tradable globally in offshore centers. I think NDF volumes will go up further. It's a step towards making rupee an internationally- traded currency. Acceptance of the rupee will go up."
It will also undermine the use of dollar in the long term. Liquidity will improve in pairs like CNHINR. These can be directly traded without involvement of dollar, making rupee more tradable, acceptable. Overseas buyers can open Vostro account with an Indian bank and they can make payments in INR to Indian exporters. The FX risk gets transferred to the overseas buyer as the rupee amount is fixed (since invoiced in INR)", he added.
Exporters, undertaking overseas shipments of goods and services through this mechanism, will be paid the export proceeds in Indian rupees from the balances in the designated Special Vostro account.