Intending to internationalise the Indian Rupee and ease the flow of payments from certain sanction-hit or crisis-rid countries, the Indian Finance Ministry has asked the Indian Banks Association to spearhead the awareness campaign of the rupee trade mechanism. This campaign will set the stage for other nations’ more significant and easier adoption of the rupee trade scheme.
The decision on the awareness campaign was taken at a meeting convened by the Department of Financial Services on the 5th of December to brainstorm ways to promote the settlement of international trade in the rupee.
The Reserve Bank of India will guide the Indian Bank Associations in this exercise. More than thirty to thirty-five countries from Asia, Scandinavia, Africa, Russia, and Myanmar have shown and expressed interest in this scheme. All these countries are facing a shortage of dollar reserves.
The robust response has prompted the government and central bank to plan special drives and workshops to sensitise trade clients and other stakeholders about settling bilateral trade in the rupee.
In July 2022, the Reserve Bank of India (RBI) notified the new rupee trade mechanism to reduce the depreciation the domestic currency against the dollar.
Recently, commerce Secretary Sunil Kumar Barthwal stated that nine Vostro accounts by Russian Bankshad been opened with two banks after the approval from RBI. Two of Russia’s top banks such as Sberbank and VTB Bank is the first foreign lender to have received the clearance. Another Russian bank called Gazprom has opened an account with UCO Bank.
Apart from UCO Bank, another Indian bank, the IndusInd Bank, is dealing with Russia. Punjab National Bank will cater to settlements regarding Myanmar.
According to the notification of the Directorate General of Foreign Trade, the domestic firms undertaking imports through this mechanism will make payment in the rupee, which will be credited into the special Vostro account of the correspondent bank of the partner country against the invoices for the supply of goods or services from overseas suppliers.
Similarly, Indian firms undertaking exports of goods and services through this mechanism will be paid the export proceeds in the rupee from the balances in the designated Vostro account of the correspondent bank of the trade partner.