Recently, there has been a lot of changes in the way India approaches its relations with outside world from taking firm stand on Russia - Ukraine war to going all out on terrorist sponsoring nation Pakistan in the United Nation Security Council debate on multilateralism. From being proactive in Central Asia to showing the mirror to the Europeans, on the way they look at world and the problems of the world. India has been practicing real kind of Realism, that is playing the game the way west has mastered in.
Now it's also important while China is pushing its official currency Renminbi, India also promotes rupee internationally and ask its friends and traders internationally to use rupee as a currency. This is not to counter anyone but it's always good to avoid currency which fluctuates a lot due to different market and political conditions beyond the control of India.
Indian banks are proactively exploring more ways to conduct trade in Indian tender internationally. Currently India has rupee trade agreements with Russia, Mauritius and Sri Lanka through the Special Rupee Vostro Accounts (SRVA).
What is Special Rupee Vostro Account?
A Special Vostro Account is a Vostro account, that a domestic bank holds for a foreign bank in the domestic bank's currency, that is the rupee in case of India. So, in Rupee vostro Accounts Indian banks keep foreign entity's holding in Indian Banks in Indian Rupee. Whenever an Indian importer has to pay, the amount is credited to this Vostro Account and when Indian importer has to receive the money it will be deducted from this Vostro account and go into the dealers authorized account. Simply put making a bridge for two different kinds of things to sail freely.
How this works?
Indian banks have to open Vostro Accounts with foreign countries banks. Indian banks have opened SRVA accounts with banks of the three countries mentioned above. Following the Reserve Bank of India’s (RBI’s) approval, 11 foreign banks opened 18 such special rupee accounts. The central bank (RBI) issued guidelines for rupee-denominated cross-border trade transactions in July.
Recently, SBI Mauritius Limited and People’s Bank of Sri Lanka opened SRVA accounts with State Bank of India (SBI), and Bank of Ceylon opened an SRVA with its subsidiary in Chennai.
Union Bank of India has opened a rupee account with Ros Bank Russia and Indian Bank has opened such accounts with three Sri Lanka-based lenders like NDB Bank and Seylan Bank. Russian Bank, Gazprom has opened account at UCO Bank. UCO Bank already has a vostro account-based facility in Iran.
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.
RBI has now allowed the special vostro accounts to invest the surplus balance in Indian government securities. As Western countries has put sanctions on Russia this method would facilitate the trade in local tender rather than the US Dollar. (Also, read the trade deals of West with Russia)
"Nine accounts have been opened. One in UCO Bank, one in Sber, one in VTB and 6 with IndusInd Bank. These six are different Russian banks," Commerce Secretary Sunil
Other term used parallel to Vostro account is the Nostro account. What is Nostro Account?
A vostro account is a record of money held by a bank or owed to a bank by a third party (an individual, company or bank). The nostro account is a way of keeping track of how much of the bank's money is being held by the other bank.
Stay tuned for more.
Get membership to feature your article. Check here.
Comments