The Reserve Bank of India (RBI) has permitted banks to open 12 special “vostro accounts”, to facilitate import-export trade in the rupee, the apex bank’s executive director Deepak Kumar said on Friday.
“We are not saying that dollar prominence should come down, but rupee prominence should go up. We are aiming for rupee acceptance. The rupee related and currency-paired rupee market should develop liquidity and depth,” he added.
Vostro accounts are held by a bank on behalf of another (often foreign) bank.
Such an arrangement forms a key part of correspondent banking.
So far, not a single overseas trade transaction directly involving the rupee has taken place.
In July, the RBI had unveiled a mechanism to settle international transactions in rupees, in order to promote global trade with emphasis on exports from India, and to push the Indian unit as an international currency. The mechanism is also expected to enable trade with sanction-hit nations such as Russia.
Hemant Jain, Vice President, PHDCCI, said in his address that the internationalisation of the rupee will also help check dollar outflows and slow down the depreciation of the rupee, albeit to a limited extent.
While elaborating on the challenges, kumar said that capital control, documentation, balance of payment reporting, and complexities of settlement and compliance among other things, were elements of friction that can be resolved with standardised regulation and innovative technology, such as RTGS 24×7.
“The RBI will hold a meeting with the Department of Financial Services and export promotion councils to promote the mechanism at the branch level, where businessmen actually do their dealings. The mechanism will also enhance India’s bargaining power in trade and spur investments”, he added.