A Rupee Replacement for the Dollar? India Desires that Countries Struggling with the Dollar Use Indian Rupee to Settle Trade Payments
- Posted on April 2, 2023
- News
- By Arijit Dutta
- 368 Views
India’s efforts to establish the Indian rupee as a reserve currency date back many years. In an endeavor, the Indian government is now advising nations lacking dollars to settle their trade obligations in Indian rupee
Even more than 18 nations have previously consented to trade in Indian money. India is prepared to conduct business in the Indian rupee with countries that are “suffering currency failure or have dollar shortage,” according to Commerce Secretary Sunil Barthwal.
After the Foreign Trade Policy (FTP) 2023 was unveiled on Friday, the secretary said the government is concentrating on bolstering the rupee payment system to increase India’s exports to USD 2 trillion by 2030.
With up to 18 nations, India has a contract that allows for settling trade agreements in rupees through 30 separate bank accounts. The RBI has also permitted several Indian banks, notably HDFC Bank and UCO Bank, to tie up with 30 foreign banks to create particular rupee Vostro accounts to promote trade abroad.
On Saturday, the Ministry of Foreign Affairs (MEA) stated that India and Malaysia had reached a historic agreement allowing the two countries to settle commerce in India Rupee. To make the Indian rupee (INR) a universal currency, revisions have been made to the FTP that now permits international trade settlement in INR.
The government had invited banks and trade associations to look at opportunities to trade in rupees with new countries. Since then, special rupee Vostro accounts have been formed by Indian banks with banks from various countries at the government’s direction, operationalizing the rupee trade arrangement.
Following the RBI’s announcement of the rules for rupee trading abroad in July of last year, Sberbank and VTB Bank of Russia were the first foreign lenders to be approved. An additional Russian bank moreover, Gazprom, has opened an account with Kolkata-based UCO Bank despite not having a branch there.
By opening the particular Vostro account, it was possible to settle rupee payments for commerce between India and Russia, facilitating cross-border trading in the Indian currency. To promote the new system, the RBI has also permitted the special Vostro accounts to invest the surplus balance in Indian government securities.
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