13 七月 2022

Indian Central Bank notifies mechanism for international trade settlement in Indian Rupees

The Reserve Bank of India has vide A.P. (DIR Series) Circular No.10 - RBI/2022-23/90, dated 11 July 2022 set up an international trade settlement mechanism in the Indian Rupee (‘INR’) to promote exports from India and to support the increasing interest of the global trading community in Indian rupee.

The mechanism puts in place an additional arrangement for invoicing, payment, and settlement of exports or imports in INR. It may be noted that Banks however would require prior approval from the Foreign Exchange Department of the RBI.

Accordingly, for settlement of trade transactions with any country, banks in India may open Special Rupee Vostro Accounts of the correspondent bank(s) of the partner trading country. Through this mechanism:

  1. Indian importers undertaking imports shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
  2. Indian exporters, undertaking exports of goods and services, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.

In this regard, the framework of Uniform Customs and Practice for Documentary Credits (UCPDC) and incoterms shall be considered for Letter of Credit and other trade-related documentation as may be decided mutually between banks of the partner trading countries.

This mechanism also enables the Indian exporters to receive advance payment against exports from overseas importers in Indian rupees.

According to the RBI Circular, issue of bank guarantee for trade transactions, undertaken through this arrangement, is permitted subject to adherence to provisions of FEMA Notification No. 8 and the provisions of Master Direction on Guarantees & Co-acceptances.

Further, the surplus balance held in the account may be used for permissible capital and current account transactions in accordance with the mutual agreement, for:

  1. Payments for projects and investments.
  2. Export/Import advance flow management
  3. Investment in Government Treasury Bills, Government securities, etc.

It may be noted that this mechanism shall come into force with immediate effect.

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