What changed
RBI introduced a new framework for invoicing, payment, and settlement of exports/imports in Indian Rupees (INR). Authorised Dealer (AD) banks can open Special Rupee Vostro Accounts for correspondent banks of trading partner countries to facilitate this. Prior approval from RBI's Foreign Exchange Department, Central Office, Mumbai is mandatory before implementing this arrangement.
What it means for you
This move allows Indian exporters and importers to settle trade in INR, reducing dependence on foreign currencies like USD. Banks must set up and manage Special Rupee Vostro Accounts, ensuring funds are used for trade obligations. It opens new avenues for trade with countries interested in using INR, potentially lowering transaction costs and hedging needs for Indian businesses.
What you must do
- Seek prior approval from RBI's Foreign Exchange Department, Central Office, Mumbai before operationalizing the INR settlement mechanism.
- Open and maintain Special Rupee Vostro Accounts for correspondent banks of partner trading countries as per FEMA regulations.
- Ensure all export/import transactions under this mechanism follow standard documentation, reporting, and UCPDC/incoterms guidelines.
- Verify advance payments against exports are released only after confirming with the correspondent bank and using available funds for existing export obligations.
- Facilitate set-off of export receivables against import payables for the same buyer/supplier, subject to Master Direction conditions.
Who it affects
All Category-I Authorised Dealer Banks, Indian exporters and importers, Correspondent banks of partner trading countries, Overseas buyers and suppliers trading with India
What is the key requirement for AD banks before starting INR trade settlement?
AD banks must obtain prior approval from RBI's Foreign Exchange Department, Central Office, Mumbai before putting in place the INR settlement mechanism for international trade.
How will Indian exporters receive payment under this mechanism?
Indian exporters will be paid export proceeds in INR from the balances in the designated Special Rupee Vostro account of the correspondent bank of the partner country.
Can advance payments against exports be received in INR?
Yes, Indian exporters can receive advance payments in INR through this mechanism, but banks must ensure available funds in the Special Vostro account are first used for existing export payment obligations and verify the claim with the correspondent bank.