RBI eases norms for opening Special Rupee Vostro Accounts

In a significant move to streamline banking operations and boost international trade, the Reserve Bank of India has announced that Authorised Dealer Category-I banks can now open Special Rupee Vostro Accounts (SRVAs) for overseas correspondent banks without prior approval from the central bank. The move is expected to enhance efficiency in cross-border transactions and promote the use of Indian currency in global trade.

The RBI’s latest circular eliminates the earlier requirement for Authorised Dealer (AD) banks to seek regulatory approval for opening SRVAs, which are used by foreign banks to facilitate trade and payments in Indian Rupees. This reform is part of ongoing efforts to simplify banking procedures and strengthen India’s position in international financial markets.

AD banks have been instructed to inform their constituents and customers about this development to ensure widespread awareness and smooth implementation. The move is anticipated to encourage greater participation from overseas banks, fostering stronger economic ties and supporting India’s push for rupee-based trade settlements.

A Special Rupee Vostro Account is a type of bank account maintained by an AD bank in India on behalf of a foreign bank or financial institution, denominated in Indian rupee (INR). These accounts are used to facilitate cross-border transactions, particularly for trade and payments, in INR rather than foreign currencies like the US dollar. The term “Vostro” refers to an account held by a local bank for a foreign correspondent bank, meaning “your account with us” in Latin.

SRVAs were introduced by the Reserve Bank of India (RBI) as part of its July 2022 framework to promote the use of the Indian rupee in international trade and reduce reliance on foreign currencies, particularly the US dollar. This initiative aligns with India’s broader objective of internationalising the Rupee and enhancing its role in global trade amid geopolitical and economic challenges, such as currency volatility and sanctions affecting dollar-based transactions.