The finance ministry has asked all banks to nominate nodal officers, who would act as a single point of contact for exporters and importers who wish to settle external trade in the domestic currency, as it seeks to promote the so-called “rupee trade” in a big way.
In a meeting last month, the department of financial services (DFS) also impressed on the banks to ensure that their relevant operating units are fully aware of the intricate details of the mechanism to settle external trade in the rupee so that they can help traders, official and banking sources told FE.
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Given the technical and other issues involved in the operationalization of such a mechanism, the government has asked the Indian Banks’ Association (IBA) to conduct special drives and workshops to sensitise trade clients of banks. Already, the Reserve Bank of India (RBI) has issued an FAQ in this matter.
The “rupee trade” has taken off, with a few transactions involving Russian firms in December, trade sources recently told FE. This was the first set of transactions since the RBI notified guidelines in July to promote the settlement of international trade in the rupee.
The idea was to not just reduce the pace of depreciation of the rupee against the dollar but also internationalise the domestic currency. Subsequently, the commerce ministry notified guidelines to enable exporters to get stipulated benefits under the foreign trade policy even if the export realisation is in the domestic currency, and not dollar.
At least a dozen-and-a-half vostro accounts have been opened so far to facilitate the rupee trade with not just sanctions-hit Russia but also Sri Lanka and Mauritius. So, more such transactions are likely to take place in the coming months, said the sources. This may spur exports to Moscow, which declined 16% until October this fiscal from a year before to $1.6 billion due to the delayed flow of payments, despite renewed interest shown by Moscow to source more goods from India.
About 30-35 countries, including those from Asia, Scandinavia and Africa, are learnt to have expressed interest in better understanding the proposed rupee trade mechanism for possible adoption. These countries include neighbours, such as Sri Lanka, Bangladesh, Nepal and Myanmar, which have been grappling with a shortage of dollar reserves. So, there is a huge scope to boost the rupee trade, senior government officials believe.
