The Reserve Bank of India (RBI) announced a few mechanisms to settle international trades in Indian Rupee, in order to encourage global trade with prominence on exports from India.
RBI said, “In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in rupee, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in rupee”.
For the utilization of this mechanism banks will need approval in advance from the foreign exchange department of RBI, the circular said. It will also address problems related to exchange rate, invoicing, and settlement.
For settlement of trade transactions, the concerned banks will need Special Rupee Vostro Accounts of correspondent bank/s of the partner trading nation.
As per the circular, “Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier”.
It added that the balance in Special Vostro accounts can be used for payments for investments and projects import/export advance flow management; and investment in government bonds.
It said, “Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
Exporters who undertake foreign shipments of goods and services through this procedure, will be paid the export proceeds in Indian rupees from the balances in the entitled Special Vostro account.
It may also entitle Indian exporters to receive payments in advance against exports from foreign importers in Indian rupees.