India has long been making efforts to make rupee a global reserve currency. As part of efforts, the Indian government is now exhorting countries facing dollar shortage to settle their trade payments in Indian rupee.
As many as 18 countries have already agreed to trade in Indian currency.
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Recently, Commerce Secretary Sunil Barthwal said India is ready to trade in Indian rupee with countries which are “facing currency failure or have dollar shortage”. Speaking after the unveiling of Foreign Trade Policy (FTP) 2023 which seeks to increase India’s exports to USD 2 trillion by 2030, the secretary on Friday said the government is focusing on strengthening the rupee payment system.
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India has an arrangement in place to settle trade deals in rupee with as many as 18 countries through 30 spceial rupee vostro accounts. The RBI has also allowed many Indian banks, including HDFC Bank and UCO Bank, to have special rupee vostro accounts tie-up with 30 overseas banks to facilitate overseas trade in the rupee.
India and Malaysia have reached a landmark agreement that will allow the two nations to settle trade in Indian Rupee, the Ministry of External Affairs (MEA) announced on Saturday.
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Meanwhile, changes have been made in the FTP to allow international trade settlement in Indian rupee with a view to making INR a global currency.
The government had asked trade bodies and banks to explore opportunities with more nations to trade in rupee. On the government’s direction, Indian banks have since then opened special rupee vostro accounts with banks of many nations, operationalising the rupee trade arrangement.
Russia’s Sberbank and VTB Bank were the two first foreign lenders to receive the approval after the RBI announced the guidelines on overseas trade in the rupee in July last year.
Another Russian bank Gazprom, which does not have its unit in India, has also opened this account with Kolkata-based UCO Bank.
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The move to open the special vostro account cleared the deck for settlement of payments in rupee for trade between India and Russia, enabling cross-border trade in the Indian currency. The RBI has also allowed the special vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.
