International trade in the domestic currency will help reduce transaction costs for the industry and several countries are in discussion with the RBI on this, Commerce and Industry Minister Piyush Goyal said on Thursday. Last year, the RBI and finance ministry asked the top management of banks and representatives of trade bodies to push export and import transactions in the rupee.
They want banks in India to connect with their foreign counterparts for opening special rupee vostro accounts to facilitate cross-border trade in the Indian currency rather than the popular mode of the US dollar.
Goyal said that today several countries are realising that in trade, there is a need for change in the currency for that and it involves a conversion cost, which in turn increases transactions cost also.
“We can address these issues through rupee trade (arrangement),” he told reporters here, adding that several countries are under discussions with the RBI on the subject.
Approvals have been granted by the RBI to domestic and foreign banks in 60 cases for opening special rupee bistro accounts of correspondent banks from 18 countries.
These countries include Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Singapore, Seychelles, Sri Lanka, Tanzania, Uganda and the UK.
Several banks, including HDFC Bank and UCO Bank, have opened special vostro accounts as of date to facilitate overseas trade in the rupee.
Sberbank and VTB Bank — the largest and second-largest banks of Russia, respectively — are the first foreign lenders to receive the approval after the RBI announced the guidelines on overseas trade in the rupee in July last year.
Another Russian bank Gazprom, which does not have its unit in India, has also opened this account with Kolkata-based UCO Bank.
The move to open the special vostro account clears the deck for settlement of payments in rupee for trade between India and Russia, enabling cross-border trade in the Indian currency, which the RBI is keen to promote.
The RBI has allowed the special vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.
