RBI unveils system for cross-border trade in rupee

Sandeep Dikshit

New Delhi, July 11

The RBI on Monday announced additional arrangement for invoicing, payment and settlement of exports and imports in rupees in order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in the rupee, said a Central Bank statement.

The move comes a couple of weeks ahead of the Shanghai Cooperation Organisation’s (SCO’s) Foreign Ministers’ meeting in Tashkent. The issue of stepping up use of local currencies will be a prominent agenda item in order to resolve payment problems after Russia was cut off from the SWIFT (messaging network for cross-border payments as is Iran – both SCO members). However, as the RBI has decided that the bank should not be from a country that has been termed high risk by the Financial Action Task Force, Iran is unlikely to be brought into this arrangement.

The step will be particularly useful for India’s trade with both these countries. Central banks of Russia and India have already met thrice to firm up a bilateral payment system for unhindered trade now that the sanctions are likely to be a constant feature for some time.

Under the RBI’s broad framework for cross-border trade transactions under the Foreign Exchange Management Act, 1999 (FEMA), all exports and imports under this arrangement will be denominated and invoiced in rupee. The exchange rate between the currencies of the two trading partner countries may be market- determined and the settlement of trade transactions under this arrangement shall take place in INR in accordance with the procedure for opening Vostro accounts (in which a corresponding bank holds on behalf of another bank).

Re slips to record low of 79.45 vs USD

• The rupee depreciated by 19 paise to close at its fresh lifetime low of 79.45 against the US dollar on Monday
• However, receding crude oil prices in the international market restricted the loss for the rupee, which posted its third straight session of decline
• At the forex market, the local unit opened weak at 79.30 against the greenback and witnessed an intra-day high of 79.24 and a low of 79.50