On Monday, the Reserve Bank of India (RBI) announced specific actions to settle international trades in rupees for promoting Global trade especially exports from India.
RBI said in an official statement that to promote the growth of global trade with special emphasis on exports from India and to promote the increasing interest of the global trading community it has been decided to make special arrangements for invoicing, payments, and settlements of exports imports in rupees. Thus, all the exports and imports under this arrangement can be measured and invoiced in rupees.
Although for implementing this system the banks need to have prior approval from the foreign exchange department of RBI, the circular said The new system will address the issues like invoicing, exchange rates, and settlements.
Additionally, the Market may decide the exchange rate between 2 currencies.
According to the circular, the concerned banks will require the Special Rupee Vostro Accounts of correspondent banks of partner trading countries for the settlement of the trade buys. Also, the rupees excess balance held can be used for the capital and current account transactions conforming to the mutual agreement.
Moreover, the balance in the special Vostro accounts can be used as payments for investing and projects, exports imports, advance flow management, and investment in government contracts.
Further the circular added that the Indian importers, importing goods and services through this process should make payment in rupees which will be credited to the special Vostro Account of the correspondent bank of the partner country, against the invoice for the supply of goods and services from the overseas sellers.
The service may provide the Indian exporters to receive advance payment for the exports in rupees from the overseas exporters.
However, before allowing the receipt of advance payment the bank should make sure the available balance in the accounts is first used for payments duties arising from already performed export orders and export payments.