With more nations attempting to reduce the use of dollars in international trade, the Indian rupee is getting closer to becoming a recognised currency. The opening of 60 special rupee vostro accounts in 18 nations, including Russia and Sri Lanka, has been authorised by India's central bank, the RBI, in order to facilitate the smooth operation of international trade in INR.

According to records, India's Reserve Bank of India (RBI) had given permission to "domestic and foreign Authorised Dealer (AD) banks in 60 cases for opening SRVAs of banks from 18 nations" for the purpose of settling payments in Indian rupees, as per Bhagwat Karad, India's Minister of State for Finance.

The minister added that, out of the 18 nations, Russia has been vocal in promoting local currency transactions as part of the larger "de-dollarization" movement. Yet, he continued, India has been promoting the idea of trade in local currency basically to increase exports.

The following 18 nations have been permitted to trade Indian rupees:

1  – Russia

2  – Singapore

3  – Sri Lanka

4  – Botswana

5  – Fiji

6  – Germany

7  – Guyana

8  – Israel

9  – Kenya

10 – Malaysia

11 – Mauritius

12 – Myanmar

13 – New Zealand

14 – Oman

15 – Seychelles

16 – Tanzania

17 – Uganda

18 – United Kingdom.

The figures clearly show a considerable advancement in the development of a system to settle international trading in Indian rupees.

What is SRVA, or Special Rupee Vostro Account?

The SRVA process was initiated in July last year when the RBI published comprehensive guidelines for cross-border commercial transactions in Indian rupees (INR).

The decision has been made to implement a new system for exports and imports that will allow for INR invoicing, payment, and settlement.

Authorized banks in India must open and maintain SRVAs of the banks in the partner trading country in order to settle trade based on new mechanisms.

These accounts maintain the foreign entity's holding in the Indian bank in INR. The money is credited to this vostro account when an Indian importer pays a foreign trader in rupees.

Likewise, money from this vostro account will be taken out and credited to the regular account of an Indian exporter when they are required to pay for products and services in rupees.

Holders of SRVAs are permitted to invest their excess funds in Indian government securities. The RBI is offering this opportunity to help spread awareness about the new system.

The Indian central bank had stated that "Indian importers conducting imports through this mechanism shall make payment in INR (Indian 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."

After the West and European nations implemented sanctions following the commencement of the "special military operation" by Vladimir Putin against Ukraine on February 24, 2022, India has been attempting to encourage the usage of the INR for trade settlement with other countries.

Major Russian banks Sberbank, VTB Bank, and Gazprombank were among the first to receive RBI permission for SRVAs.