The Reserve Bank of India (RBI) said it has set up an “additional arrangement” for settlement of international trade in Indian rupee.
In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in Indian rupee, it has been decided to put in place an additional arrangement for invoicing, payment and settlement of exports / imports in rupee, the central bank said in a statement.
Before putting in place this mechanism, authorized dealer banks shall require prior approval from the Foreign Exchange Department of RBI, it said.
Under the framework, the RBI said, all exports and imports may be denominated and invoiced in rupee, exchange rate between the currencies of the two trading partner countries may be market determined and the settlement of trade transactions shall take place in rupee in accordance with the procedure laid down.
Authorized dealer (AD) banks in India have been permitted to open rupee vostro accounts. Accordingly, for settlement of trade transactions with any country, AD bank in India may open special rupee vostro accounts of correspondent bank/s of the partner trading country.
Indian importers undertaking imports through this mechanism shall make payment in rupee 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, the apex bank said.
Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in rupee from the balances in the designated special vostro account of the correspondent bank of the partner country.
The export / import undertaken and settled in this manner shall be subject to usual documentation and reporting requirements, it said.
Letter of Credit (LC) and other trade related documentation may be decided mutually between banks of the partner trading countries under the overall framework of Uniform Customs and Practice for Documentary Credits (UCPDC) and incoterms. Exchange of messages in safe, secure, and efficient way may be agreed mutually between the banks of partner countries, the RBI said.
Indian exporters may receive advance payment against exports from overseas importers in Indian rupees through the above Rupee Payment Mechanism. Before allowing any such receipt of advance payment against exports, Indian banks shall ensure that available funds in these accounts are first used towards payment obligations arising out of already executed export orders / export payments in the pipeline, it said.
