MUMBAI: The Bank of India’s decision to let importers pay in rupees and exporters pay in rupees should ease trade with Russia and its South Asian neighbors and contribute to a long-term goal of internationalizing the currency, experts said.
On Monday, the Reserve Bank of India announced that it has established a mechanism for international trade settlements in Indian rupees (INR), effective immediately.
That RBI said that “to encourage the growth of world trade centered on exports from India and to support the increasing interest in INR from the global trading community, it was decided to introduce an additional arrangement for the invoicing, payment and settlement of exports/imports in INR. ”
“This move can be particularly useful for neighboring countries and also for countries willing to use the rupee as a base currency for trade diversification in their settlement rules,” said Rahul Bajoria, chief economist for India at Barclays.
Engineering Export Promotion Council Chairman Mahesh Desai noted that the new mechanism would “facilitate trade with countries under sanctions, such as Iran and Russia.”
Trade between India and Russia has come to a virtual standstill due to sanctions against Russia over the war in Ukraine.
The new moves will allow Indian exporters and importers to use dedicated rupee vostro accounts to settle rupee-denominated trades, and banks will need RBI approval to use the settlement system.
“We see this as a first step towards 100 percent rupee convertibility,” Desai said, noting that it would also reduce the risk of currency volatility for importers and exporters.
On Monday, the Reserve Bank of India announced that it has established a mechanism for international trade settlements in Indian rupees (INR), effective immediately.
That RBI said that “to encourage the growth of world trade centered on exports from India and to support the increasing interest in INR from the global trading community, it was decided to introduce an additional arrangement for the invoicing, payment and settlement of exports/imports in INR. ”
“This move can be particularly useful for neighboring countries and also for countries willing to use the rupee as a base currency for trade diversification in their settlement rules,” said Rahul Bajoria, chief economist for India at Barclays.
Engineering Export Promotion Council Chairman Mahesh Desai noted that the new mechanism would “facilitate trade with countries under sanctions, such as Iran and Russia.”
Trade between India and Russia has come to a virtual standstill due to sanctions against Russia over the war in Ukraine.
The new moves will allow Indian exporters and importers to use dedicated rupee vostro accounts to settle rupee-denominated trades, and banks will need RBI approval to use the settlement system.
“We see this as a first step towards 100 percent rupee convertibility,” Desai said, noting that it would also reduce the risk of currency volatility for importers and exporters.
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