RBI, finance ministry ask companies and banks to push exports using rupee
New Delhi, Sep 8, 2022
The Reserve Bank of India (RBI) and the finance ministry on Wednesday asked banks and industry bodies to push exports using rupee and vowed to quickly clear applications for the purpose.
The push comes at a time when trade with Russia is taking place through alternate channels, with payments being a key challenge, amid sanctions for a large part of the business. The central bank has maintained that this rupee-denominated trade is a long-term exercise and will take time before its impact is felt. The idea is to help internationalise the Indian rupee.
During a meeting with banks on Wednesday, the two agencies asked banks to get their counterparts to open special rupee vostro accounts to facilitate crossborder trade in the Indiancurrency, instead of using dollars or euros. The discussion came as banks have been slow in moving ahead with the plan.
Besides, the ministry of external affairs, commerce department and trade bodies have been tasked with spreading awareness and nudging their partners to join the framework, a banker who attended the meeting said.
According to sources, to begin with, countries such as Sri Lanka, Argentina andZimbabwe may be interested in settling bilateral trade in the Indian currency.
The government and the RBI have argued that the move will reduce the downward pressure on the rupee, while reducing transaction costs and eliminating foreign exchange risk for businesses. Currently, every conversion of the currency entails a charge and there is an exchange rate risk between the time that the order is placed, delivered and payment received.
The move can also help countries with a balance of payment problem, policymakers have argued.
Under the new arrangement, authorised dealers in India can open special rupee vostro accounts of correspondent bank from a partner country. Indian importers will make payments in rupees, which will be credited into these accounts, while exporters can be paid in Indian rupees from balance available in the vostro account.
Besides, businesses can set off export receivables against imports and bank guarantees for trade transactions are also permitted.
The surplus balance can be used for specified current or capital account transactions in line with provisions of the mutual agreement. Further, funds in the accounts can be used for projects and investments, investment in government securities and other purposes.
[The Times of India]