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Banks from 18 countries get RBI’s nod to trade in rupee: Centre in RS

The Reserve Bank of India (RBI) has permitted banks from 18 countries to open Special Vostro Rupee Accounts (SVRAs) to settle payments in rupees, the government said. Speaking in Rajya Sabha, Union Minister of State for Finance Bhagwat Kishanrao Karad said that 60 such approvals have been given by the RBI.

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Here are the 18 Countries which get RBI’s Nod:

These 18 nations include Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda and the United Kingdom.

India and The Special Vostro Rupee Accounts (SVRAs):

  • The process of SVRAs began in July 2022 when the RBI announced that, “it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR [Indian rupees]”.
  • The announcement came against the backdrop of the commodities crisis triggered by the Western sanctions against Russia after President Vladimir Putin launched the “special military operation” against Ukraine in February 2022.
  • Trade in local currencies have been mooted as a solution to avoid the current wave of wartime international sanctions that are hampering supply chains and global trade flows.

What is a Vostro Account:

A vostro account is an account that domestic banks hold for foreign banks in the former’s domestic currency, in this case, the rupee.

  • Domestic banks use it to provide international banking services to their clients who have global banking needs.
  • The SRVA is an additional arrangement to the existing system that uses Freely convertible currencies and works as a complimentary system.
  • The existing systems require maintaining balances and position in such currencies like US dollar and pound to facilitate trade.

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