Vostro Account: Instead of Dollar, now you will be able to do foreign trade in Indian Rupee, understand the meaning of this change in law.
Highlights
- Permission for settlement, billing and payment of import-export transactions in Indian Rupees
- Permission to open Special Rupee Vostro accounts of respective banks of the trading country
- A major part of bilateral trade between Russia is in rupee due to US sanctions.
Vostro Account: Now Indian businessmen will be able to make payments in foreign trade through rupees. The Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry has notified the changes in the policy. Under this, the central bank has permitted authorized banks in India to open Special Rupee Vostro accounts of the respective banks of any participating trading country to facilitate trading in Indian currency.
The Reserve Bank of India (RBI) in July had asked banks to make additional arrangements to conclude export and import transactions in rupees. In view of the increasing interest of the global business community towards the Indian currency, RBI had proposed to introduce this facility. Now the government has amended the foreign trade policy to allow international business invoicing, payment and settlement in Indian Rupee.
DGFT said in a notification, “Paragraph 2.52 (D) has been notified in pursuance of RBI’s circular dated July 11, 2022 which allows settlement, billing and payment of import-export transactions in Indian Rupees.”
what is the new system
The trade policy approved by the government states that under the arrangement, Indian importers will pay in rupees to a special Vostro account of the partner country’s bank in lieu of invoice for supply of goods or services from a foreign seller or supplier. Indian exporters exporting goods and services through this mechanism will be paid the export proceeds in Indian Rupees from the balance in the Vostro account of the respective bank of the participating country.
Vostro Account was in the top list of the government
Finance Minister Nirmala Sitharaman held a meeting last week to review the proposed trading in rupee and asked banks to expedite the process of opening special rupee vostro accounts. The commerce department has also been asked to reach out to the traders to encourage them to take this route.
RBI had issued the letter
It is known that the Reserve Bank of India (RBI) issued a letter in July 2022 asking banks to make additional arrangements for export and import transactions in rupee in view of the increasing interest of the global trading community in domestic currency. was told to do. The announcement by RBI to allow cross-border trade transactions in rupee is a step towards internationalization of currency.
Why the need of Vostro Account was needed
Since the Russian attack on Ukraine, a major part of the bilateral trade between India and Russia is being done in rupees due to sanctions imposed by the US and Europe. The central bank had said that for settlement of business transactions, the banks concerned would require special rupee ‘Vostro’ accounts of the banks of the partner trading country.
What is Vostro Account What is Vostro Account
A Vostro account is an account maintained by a correspondent bank on behalf of another bank. For example, a Vostro account of a foreign bank is being maintained by a domestic bank in India. These accounts are used to settle foreign trade.
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