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Reserve Bank of India Permits Banks from 18 Countries to Open Special Rupee Accounts for Settlements

The Reserve Bank of India (RBI) has granted permission to banks from 18 countries to open Special Vostro Rupee Accounts (SVRAs) for settling payments in Indian rupees. This move is aimed at boosting exports and trade in local currencies, and comes as a response to the current wave of international sanctions that have been hampering supply chains and global trade flows.

The list of countries whose banks have been permitted to open SVRAs includes Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom. Russia, which has been vocal about using trade in local currency to promote the overall process of “de-dollarisation”, is among the countries whose banks have been granted permission to open SVRAs.

The process of SVRAs began in July 2022 when the RBI announced an additional arrangement for invoicing, payment, and settlement of exports/imports in INR. This move came in the backdrop of the commodities crisis triggered by the Western sanctions against Russia after President Vladimir Putin launched the so-called “special military operation” against Ukraine in February 2022.

India has been supporting the idea of trade in local currency mainly to boost exports. The country has been finalizing trade pacts with partner countries such as the UAE and Australia, and has begun negotiations with others such as the UK and the European Union. The aim is to make inroads for the national currency in bilateral and global trade.

The RBI has delineated procedures for trade in INR in its Circular (No 10 RBI/2022-2023/90 dated 11.07.2022 on ‘International Trade Settlement in Indian rupees’), and has also issued Frequently Asked Questions (FAQs) on its website to clarify matters related to operationalisation of SVRAs.

The move to promote trade in local currencies is not new. Several countries have been exploring ways to reduce their dependence on the US dollar for international trade. In recent years, China has been promoting the use of the yuan in international trade, while Russia has been pushing for the use of the ruble. The use of local currencies in trade can help countries reduce their exposure to currency fluctuations and reduce their reliance on the US dollar.

The move by India to promote trade in local currency is a positive step towards reducing dependence on the US dollar for international trade. It is also in line with the country’s efforts to boost exports and promote bilateral and global trade. As more countries explore ways to reduce their dependence on the US dollar, the use of local currencies in trade is likely to become more common.

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