The mechanism may enable Indian exporters to receive advance payments in rupees for exports from foreign importers
The mechanism may enable Indian exporters to receive advance payments in rupees for exports from foreign importers
The Reserve Bank of India (RBI) on Monday asked banks to make additional arrangements for export and import transactions in Indian rupees in view of the growing interest of the global trading community in the domestic currency.
The central bank said in a circular that before implementing this mechanism, banks would need prior approval from the foreign exchange department of RBI.
“In order to promote the growth of global trade with emphasis on exports from India and to support the growing interest of the global trading community in INR, it has been decided to introduce an additional mechanism for invoicing, payment and settlement of export/import is taken in INR,” it said.
Special Rupee Vostro Accounts Required
For settlement of business transactions, the respective banks would require special Rupee Vostro accounts of the correspondent bank/s of the participating trading country.
“Indian importers importing through this mechanism shall make payment in INR, which shall be credited to the special Vostro account of the correspondent bank of the partner country against the invoice for supply of goods or services from the foreign seller/supplier,” it said.
Exporters, who undertake overseas shipments of goods and services through this mechanism, shall be paid export proceeds in Indian Rupees from the balance in the specified Special Vostro Account.
This mechanism can enable Indian exporters to receive advance payments in Rupees against exports from foreign importers.
As per the circular, the rupee surplus balance held can be used for permissible capital and current account transactions as per mutual agreement.
Balances in special Vostro accounts can be used to pay for projects and investments; export/import advance flow management; and investing in government bonds.