RBI Greenlights Investment of SRVA Surplus Balances in Government Securities

Reserve Bank of India (RBI) announced that foreign banks holding special rupee vostro accounts (SRVAs) can now invest their entire surplus balance in central government securities. This move removes the earlier 30% cap and is aimed at boosting rupee-denominated trade settlements and investments, furthering the internationalisation of the Indian rupee.

Key Changes Announced

• Earlier Rule: Only 30% of vostro account balances could be invested in short-term government securities (residual maturity under one year, including treasury bills).
• New Rule (2025): Entire surplus in vostro accounts can now be invested in central government securities, without any cap.
• Registration Requirement: Holders of SRVAs can invest without registering as Foreign Portfolio Investors (FPIs).

Strategic Significance

• Boost to Rupee Internationalisation: Encourages foreign trading partners to hold and use rupees for trade settlement.
• Liquidity Utilisation: Enables more productive use of surplus balances.
• Debt Market Support: Increases demand for Indian government securities.

Current Status of SRVAs

• Approved Correspondent Banks: 123.
• Countries Covered: 30 trading partners.
• Total SRVAs Opened: 156 with 26 Indian banks.
• Purpose: Promote bilateral trade in local currencies.

What Are Vostro Accounts?

Definition: A vostro account is maintained by a domestic bank on behalf of a foreign bank, allowing trading partners to hold rupee-denominated balances from trade transactions.

Special Rupee Vostro Accounts (SRVAs): Introduced by the RBI in 2022 to facilitate international trade settlement in Indian rupees.