The Reserve Bank of India on 11th July 2022, has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR, in order to promote the growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR.Before putting in place this mechanism, Authorised Dealer Banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai.
All exports and imports under this arrangement may be denominated and invoiced in Rupee and the Exchange rate between the currencies of the two trading partner countries may be market determined.
In terms of Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016, AD banks in India have been permitted to open Rupee Vostro Accounts. Accordingly, for settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country. In order to allow settlement of international trade transactions through this arrangement, it has been decided that:
- 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.
- Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.
The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in Special Vostro Accounts can be used for:
- Payments for projects and investments.
- Export/Import advance flow management
- Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provision.
