Six more countries keen on trade settlement in rupee

New Delhi, December 16

India’s rupee trade settlement mechanism, a means of using rupees instead of dollars and other big currencies for international transactions, is attracting interest from more countries.

Nod to vostro a/cS of Mauritius, Lanka

• Tajikistan, Cuba, Luxembourg and Sudan have begun talking to India about using the mechanism
• It has already been used by Russia following the imposition of sanctions on Moscow over the Ukraine war
• Mauritius and Sri Lanka have also shown interest, and have seen their special vostro accounts approved by the RBI

Tajikistan, Cuba, Luxembourg and Sudan have begun talking to India about using the mechanism, according to two sources and an official document reviewed by Reuters. It has already been used by Russia following the imposition of sanctions on Moscow over the Ukraine war. The RBI set up the mechanism in July.

The government is looking to bring countries that are short of dollars into the mechanism, said a government official and an industry source aware of the development. The sources declined to be named, as the matter is confidential.

The four countries have shown interest in opening special rupee accounts, called vostro accounts, but partner banks in India have not yet provided those facilities, documents showed. Opening of these accounts needs approval from the Reserve Bank of India.

Mauritius and Sri Lanka have also shown interest, and have seen their special vostro accounts approved by the RBI, documents showed.

India’s central bank has given approval to banks to open 12 vostro for trade in rupees with Russia, according to the document. Six other accounts, including five for trade with Sri Lanka and one for trade with Mauritius have been authorised, the same document showed.

Queries sent to the Finance Ministry, Commerce Ministry and the RBI remained unanswered.

Talks with Gulf nations

Details of potential rupee-dirham trade mechanism are being firmed up by the central banks of India and the UAE, a second government official said, requesting anonymity. Talks with Saudi Arabia on a rupee-riyal trade mechanism also continue, the government official added. — Reuters