RBI Permits Banks to Open 12 Special Vostro Accounts for Trade in Rupees

So far, not a single overseas trade transaction directly involving the rupee has taken place

· RBI had earlier allowed two Indian lenders — UCO and IndusInd Bank — to open nine special vostro accounts for facilitating overseas trade in rupee.

The Reserve Bank of India (RBI) has permitted banks to open 12 special "vostro accounts", to facilitate import-export trade in the rupee, the apex bank's executive director Deepak Kumar said on Friday, 25 Nov. 2022.

The RBI had earlier allowed two Indian lenders — UCO and IndusInd Bank — to open nine special vostro accounts for facilitating overseas trade in rupee.

“We are not saying that dollar prominence should come down, but rupee prominence should go up. We are aiming for rupee acceptance. The rupee related and currency-paired rupee market should develop liquidity and depth,” he added.

Vostro accounts are held by a bank on behalf of another (often foreign) bank.

Such an arrangement forms a key part of correspondent banking.

So far, not a single overseas trade transaction directly involving the rupee has taken place.

In July, the RBI had unveiled a mechanism to settle international transactions in rupees, in order to promote global trade with emphasis on exports from India, and to push the Indian unit as an international currency. The mechanism is also expected to enable trade with sanction-hit nations such as Russia.

“The RBI will hold a meeting with the Department of Financial Services and export promotion councils to promote the mechanism at the branch level, where businessmen actually do their dealings. The mechanism will also enhance India’s bargaining power in trade and spur investments”, he added.