A top government official said on Wednesday that several banks, including HDFC Bank and UCO Bank, have opened special Vostro accounts to facilitate foreign trade in rupees and several countries have expressed interest in having this arrangement for local currency trade.
Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi said the commerce ministry is in regular touch with banks, department of financial services and exporters on the issue.
“As of now 20 banks have opened special rupee vostro accounts,” he told reporters here. He said that all major banks have shared a list of nodal officers to resolve the issues of exporters related to these accounts.
“This is a new initiative, there are teething problems related to exchange rate mechanism, repatriation of funds. So, it has not stopped completely…but we are constantly in touch with banks, RBI and our exporters to ensure that It picks up,” Sarangi said.
He said that some exporters in Jaipur and other places have started trading in rupees.
Some African countries which are facing foreign exchange problems and facing US Dollar and Euro mobilization issues are showing interest in Rupee (INR) trading mechanism.
India’s neighboring countries including Bangladesh, Sri Lanka and Mauritius are also taking initiative to open INR vostro account. These accounts are also opened by some developed countries like Israel and Germany.
DGFT hoped that more countries would come forward for this mechanism.
Commerce Secretary Sunil Barthwal said, “Initially we were focusing on Russia as they were facing sanctions, but now we are in talks with many other countries.”
“We have discussed with some African and Gulf countries. They are also interested,” Barthwal said.
The opening of several Vostro accounts shows that banks are looking at the possibility of doing business in rupees, he said.
“The fact that Russian banks have opened accounts, Indian banks have opened accounts shows that there is potential for trading in the rupee,” the secretary said.
Sberbank and VTB Bank – Russia’s largest and second largest banks respectively – are the first foreign lenders to receive approval after the RBI announced guidelines on foreign trade in rupees in July last year.
Another Russian bank Gazprom, which does not have a bank in India, has also opened this account with Kolkata-based UCO Bank.
The move to open the special Vostro account clears the decks for settlement of payments in rupees for trade between India and Russia, enabling cross-border trade in the Indian currency, which the RBI seeks to promote.
The Reserve Bank of India has allowed special Vostro accounts to invest surplus balances in Government of India securities to help popularize the new system.
Last year, the RBI and the finance ministry had asked the top management of banks and representatives of trade bodies to promote export and import transactions in rupees. They want banks in India to join their foreign counterparts in opening special rupee vostro accounts to facilitate cross-border trade in Indian currency instead of the popular mode of US dollars.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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