Amid increasing pressure on the Indian currency in the wake of the Russian-Ukraine conflict, the central bank on Monday announced an international trade settlement for INR, to promote global trade, emphasize export, and globally increase the interest of trading communities in INR. An additional arrangement of invoicing, payments, and settlement of import/export in the Indian Rupee has been put in place through this.
Before implementing this mechanism, banks will have to take prior approval from the Foreign Exchange Department of the RBI. Special Rupee Vostro Accounts will be required of the partner trading country’s bank.
This may enable advance payments for Indian Exporters in the Indian rupee. If there is a surplus amount in the Vostro account, it can be used for projects, investments, import/export advance flow management, and investment in government bonds and securities.
Authorized Dealer Bank should ensure the FATF(Financial Action Task Force) status of its correspondent bank. If a bank from a trade partner company approaches AD Bank to open a special Vostro account, the AD bank must take approval from the Reserve Bank of India.