Article - Indian Exporters Begin Invoicing in Indian Rupee. RBI Pushes Rupee Internationalisation
The Reserve Bank of India (RBI) is actively promoting the internationalisation of the Indian Rupee (INR), a multi-faceted process designed to increase its use in global trade, finance, and investment.
🤝 Mechanism for INR Invoicing and Settlement
The RBI introduced a framework on July 11, 2022, to facilitate the settlement of international trade in INR.
Special Rupee Vostro Accounts (SRVAs): An SRVA is an account opened by a foreign bank with an Authorized Dealer (AD) bank in India (an Indian bank allowed to deal in foreign exchange) in Indian Rupees.
For Exporters: An Indian exporter can receive payment for goods and services in INR from the balances held in the designated SRVA of the overseas importer's correspondent bank.
This eliminates the need for a foreign currency conversion for the Indian exporter. For Importers: An Indian importer's payment in INR is credited to the special vostro account against the invoice for the supply of goods and services from the international exporter.
Trade Benefits: The framework allows all exports and imports under this arrangement to be denominated and invoiced in INR, with the settlement also taking place in INR.
Furthermore, the Directorate General of Foreign Trade (DGFT) has amended the Foreign Trade Policy (FTP) to permit the grant of export benefits and the fulfillment of Export Obligations for export realisations in INR, provided they adhere to the RBI guidelines. Surplus Balance Use: The surplus INR balance in the SRVAs can be utilized for purposes like payments for projects and investments, managing export/import advance flows, and investing in Government Treasury Bills and Securities.
🎯 Objectives of Rupee Internationalisation
The RBI's move is primarily aimed at:
Reducing Exchange Rate Risk: By invoicing and settling in INR, Indian businesses are shielded from the volatility of foreign currencies like the US Dollar, which can erode profit margins.
Promoting Global Trade Growth: The system facilitates trade with countries that face currency shortages or those that have been cut off from the global SWIFT payment system, allowing for a safe and secure exchange of messages and payments.
Supporting Global Interest in INR: It capitalizes on the growing global interest in the Rupee and establishes it as a currency for cross-border transactions, reducing reliance on a few dominant global currencies.
Lowering Transaction Costs: Using a local currency reduces conversion costs and simplifies the process of exchanging and trading in foreign currencies.
Achieving Developed Economy Status: According to RBI officials, the ability to invoice largely in one's own currency is a characteristic of advanced economies.
🚀 Recent Steps to Promote Rupee's Global Role
The RBI has recently taken further steps to enhance the rupee's international standing:
Cross-Border Lending in INR: Authorized Dealer banks have been permitted to lend in Indian Rupees to non-residents from Bhutan, Nepal, and Sri Lanka for bilateral trade transactions.
Expanded Use of SRVA: Foreign banks can now use their SRVA balances to invest in corporate bonds and commercial papers, improving liquidity and making INR-based trade settlements more efficient, in addition to government securities.
Transparent Reference Rates: The RBI plans to establish transparent reference rates for the currencies of India's major trading partners to facilitate smoother INR-based cross-border transactions.
These measures signify an ongoing, calculated effort by the RBI and the government to make the Rupee a globally accepted and used currency for trade and finance.
Comments
Post a Comment