RBI Expands Facility for International Trade Settlement in Indian Rupees

The Reserve Bank of India (RBI) has announced an expansion of the facilities for international trade settlements in Indian Rupees (INR). As per the updated guidelines, Authorised Dealer Category – I (AD Category – I) banks that were allowed to open an additional special current account specifically for the settlement of export transactions may now utilise it for import transactions as well.

Key Developments:

i) Previously, AD Category – I banks maintaining Special Rupee Vostro Accounts were authorized to open an additional special current account solely for the settlement of export transactions. This was introduced under FED Circular No. 08, dated November 17, 2023.

ii) The new provision, effective as of the recent RBI circular, extends this facility to include the settlement of both export and import transactions. This move aims to offer greater operational flexibility to exporters and importers.

Operational Flexibility:

The decision allows banks to offer a more versatile mechanism for handling trade-related payments. Indian importers will make payments in INR, which will be credited to the Special Vostro Account of the correspondent bank in the partner country, covering invoices for goods or services from overseas suppliers.

Conversely, Indian exporters will receive payments in INR from the balances in the Special Vostro Account for their export transactions. This arrangement also facilitates the ability for Indian exporters to receive advance payments in INR from overseas buyers.

This expansion of the facility is designed to streamline the process of international trade settlements, making it easier for businesses to conduct transactions in INR and manage cross-border trade more effectively.