After getting a nod from the Reserve Bank of India (RBI), nine special vostro accounts have been opened in order to facilitate foreign trade in the rupee.
More About The Development:
Sberbank and VTB Bank — the largest and second-largest banks of Russia, respectively — are the first foreign lenders to receive the approval after the RBI announced the guidelines on overseas trade in the rupee in July.
Another Russian bank Gazprom – which does not have its bank in India – has also opened this account with Kolkata-based Uco Bank. UCO Bank already has a vostro account-based facility in Iran. Gazprombank, or GPB, is a privately-owned Russian lender and the third-largest bank in the country by assets.
What Has Been Said:
“Nine accounts have been opened. One in Uco Bank, one in Sber, one in VTB and 6 with IndusInd Bank. These six are different Russian banks,” Commerce Secretary Sunil Barthwal told.
Significance Of This:
The move to open the special vostro account clears the deck for settlement of payments in rupee for trade between India and Russia, enabling cross-border trade in the Indian currency, which the RBI is keen to promote.
The RBI has allowed the special vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.
Move To Globalize The Rupee:
The RBI and finance ministry asked the top management of banks and representatives of trade bodies to push export and import transactions in the rupee. They want banks in India to connect with their foreign counterparts for opening special rupee vostro accounts to facilitate cross-border trade in the Indian currency rather than the popular mode of the US dollar.
What is a Vostro Account:
To accept payments in rupees, authorized dealer banks will be able to open special Rupee Vostro accounts. A Rupee Vostro account is a foreign bank’s account with an Indian bank in rupees in India. For example, HSBC holding an account with the State Bank of India in the Mumbai branch, denominated in rupees, is called a Rupee Vostro account. Foreign parties will be able to send and receive money from Indian exporters and importers via these Rupee Vostro accounts.