The Reserve Bank of India (RBI) has announced an extensive mechanism to accelerate cross-border trade settlements in Indian rupees (INR) in a move to bolster trade in the Indian currency. To execute the plan, the central bank is pushing for invoicing, payment and settlement of exports/imports in rupees.
Authorised dealer banks can only execute this mechanism if they get prior approval from the Foreign Exchange Department of the RBI in Mumbai. The central bank also observed that the exchange rate between trading partners would depend on the market.
The RBI said in its announcement: “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.”
The central bank highlighted that Indian exporters would receive export proceeds in rupees from the balances in the designated special Vostro account of the correspondent bank of the partner country.