In an effort to promote trade in domestic currency, the Ministry of Commerce and Industry on Friday permitted exports and imports to be invoiced, paid for, and settled in the Indian rupee.
Due to the growing interest of the international trade community in the domestic currency, the Reserve Bank of India (RBI) had instructed banks to set up additional provisions for export and import transactions in Indian rupees in July. The Directorate General of Foreign Trade (DGFT) inserted a new paragraph to the Foreign Trade Policy (FTP) to align it with this RBI judgement.
In light of this, it was stated that authorised dealer banks in India may also open specific rupee vostro accounts to settle trade transactions in INR.
According to the amended paragraph, Indian importers using this mechanism will pay in INR against the invoices for the supply of goods or services from the overseas seller/supplier. This payment will be credited into the special vostro account of the correspondent bank of the partner country.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.