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Finance Ministry to meet with bank chiefs to promote cross-border trade in rupees

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About 9 special vostro accounts have been opened to facilitate foreign trade of the rupee. (Case)

New Delhi:

The Ministry of Finance has convened a meeting of CEOs (managing directors) of banks, including the six major private sector lenders, on December 5 to discuss ways to promote cross-border trade in rupees instead of US dollars.

In addition, sources said the meeting, which will be attended by other stakeholders, including senior officials from the ministries of external affairs and trade, will review progress made on this front so far.

Financial Services Secretary Vivek Joshi will chair the meeting and is also expected to see the participation of representatives from the Reserve Bank of India and the Association of Indian Banks (IBA), sources said.

In line with the detailed guidelines of the Reserve Bank of India (RBI) on cross-border trade transactions in national currency in July, about nine special vostro accounts were opened with two Indian banks to facilitate foreign trade in rupees.

Sberbank and VTB Bank, Russia’s largest and second-largest bank respectively, are the first foreign lenders to receive approval after the RBI announced the guidelines.

RBI, in accordance with the guidelines, has decided to put in place an additional arrangement for invoicing, payment and settlement of exports/imports in INR.

Another Russian bank, Gazprom, which does not have a bank in India, also opened this account with UCO Bank, based in Kolkata.

The decision to open the vostro special account paves the way for the settlement of rupee payments for trade between India and Russia, enabling cross-border trade in Indian currency, which the RBI is keen to promote.

The RBI allowed special vostro accounts to invest the excess balance in Indian government securities to help popularize the new arrangement.

UCO Bank already has a Vostro account in Iran. Gazprombank, or GPB, is a private Russian lender and the country’s third-largest bank by assets.

“Indian importers who undertake imports through this mechanism will make payment in INR, which will be credited to the special vostro account of the correspondent bank in the partner country, against the invoices for the supply of goods or services from the seller / supplier stranger,” RBI had said earlier.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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