The introduction of the rupee trade settlement mechanism by the RBI had come amid increasing pressure on the Indian currency in the wake of Russia's invasion of Ukraine in late February 2022.
Under the framework, all exports and imports may be denominated and invoiced in rupees, with the exchange rate between the currencies of the two trading partner countries to be market determined. To settle these trade transactions, authorised Indian banks have to open Special Rupee Vostro accounts of correspondent banks of the partner trading country.
The Indian central bank, in July 2022, had announced the setting up of a mechanism to settle international trade in rupees. The 18 countries are as follows: Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and United Kingdom. Responding to a question in the Rajya Sabha on March 14, Minister of State for Finance Bhagwat Karad said the central bank had granted 60 approvals in total so far to domestic and authorised foreign banks to open so-called 'Special Rupee Vostro Accounts' of correspondent banks from 18 countries, including those from major nations such as the United Kingdom and Germany.
The Reserve Bank of India (RBI) has granted approvals to banks from 18 countries to open Vostro accounts to settle international trade in rupees, the government has said.
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