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Government asks trade bodies and banks to expand rupee trade with more countries

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New Delhi: The Indian government has asked trade bodies and banks to explore rupee trading opportunities with more countries after facilitating currency trade with nations such as Mauritius, Russia and Sri Lanka.

For the uninitiated, in July, the Reserve Bank of India (RBI) had set up a mechanism to settle in rupees India’s overseas trade transactions with consenting nations. The mechanism was introduced amid a steadily falling rupee, with the government hoping the move would help India pay for imports using local currency instead of US dollars from its foreign exchange reserves.

Special accounts in vostro rupee, or SVRA, have been opened by Indian banks with banks in Mauritius, Russia and Sri Lanka.

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

SBI Mauritius Ltd and People’s Bank of Sri Lanka have opened an SVRA with State Bank of India (SBI), while Bank of Ceylon has recently opened an account at its Indian branch in Chennai.

Russia’s Ros Bank has opened a special rupee account with Union Bank of India, while Sri Lanka has opened three such accounts with the Chennai-based Indian bank.

How many rupee special accounts have been opened?

So far, a total of 18 rupee special accounts have been opened by 11 banks following RBI approval.

India in talks with UAE and Saudi Arabia

A report of The new Indian Express Sources quoted said that India was in talks with the United Arab Emirates and Saudi Arabia to allow settlement of the Indian rupee trade.

“The United Arab Emirates is a big market for India, so it is obvious that traders in the country will benefit from this decision. Similarly, Saudi Arabia is an important trading partner of India. However, the problem lies in the fact that we are a net importer of these two countries, so managing excess rupees can be a problem,” the report quoted a senior government source as saying.

According to the Ministry of Commerce, India’s exports to the United Arab Emirates and Saudi Arabia recorded a decline in October 2022.

India tried to promote the rupee trade after the Russo-Ukrainian war and the sanctions imposed by the West.

With contributions from agencies

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