India holds review meeting with heads of banks to promote cross-border trade in rupee

Indian Finance Ministry has held a comprehensive review meeting with CEOs of banks, including the top six private sector lenders, and discussed ways to promote cross-border trade in rupee.

Representatives from the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA), as well as senior officials from the external affairs and commerce ministries, attended the meeting on Monday (5 December), according to The Economic Times.

The meeting reviewed the progress and issues being faced by bankers on this front, the report says.

Following the Russia Ukraine war and the sanctions imposed by the West, India has been trying to promote the rupee.

In July, the Reserve Bank of India (RBI) released detailed rules about cross-border trade transactions in domestic currency. Since then, about nine special vostro accounts have been opened with two Indian banks to facilitate overseas trade in rupee.

Russia's largest and second-largest banks, Sberbank and VTB Bank, are the first foreign lenders to get approval since the RBI put out the rules.

RBI, as per the guidelines, decided to put in place an additional arrangement for invoicing, payment, and settlement of exports and imports in INR.

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

Opening the special vostro account makes it possible to settle payments in rupee for trade between India and Russia. This makes it possible to trade in the Indian currency across borders, which the RBI is keen to promote.

The RBI has allowed the special vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.

UCO Bank already has a vostro account-based facility in Iran. Gazprombank is a privately-owned Russian lender and the third-largest bank in that country by assets.

"Indian importers undertaking imports through this mechanism 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 or supplier," RBI had said earlier.