Indian rupee goes global, the likes of Cuba, Sudan want to follow suit
The Reserve Bank of India announced the setting up of a mechanism to carry out international trade in Indian rupees. The Indian government is looking at ways to bring countries that are particularly short of dollars into the ambit of the mechanism
Image used for representative purpose. PTI
India’s rupee trade settlement has attracted other nations to adopt a similar mechanism.
The Indian rupee trade settlement mechanism is a means of using the currency in all international transactions instead of dollars and other big currencies.
According to an official document reviewed by Reuters, countries including Tajikistan, Cuba, Luxembourg and Sudan have already begun discussing the idea with India.
The mechanism was launched by the Reserve Bank of India (RBI) in July. Countries like Russia already have such a system in place following sanctions on Moscow since the country waged a war against Ukraine.
The Indian government is looking at ways to bring countries that are particularly short of dollars into the ambit of the mechanism, said a government official aware of the development.
Also, four countries have shown interest in opening a special rupee account called ‘Vostro accounts.’ However, the documents showed that partner banks in India have not yet provided facilities or means to open such accounts. In case a country wants to open a Vostro account, it would need the approval of the RBI.
Mauritius and Sri Lanka, who also showed interest in such accounts, have gotten approval from the RBI for setting up their special Vostro accounts.
The document also reveals that the Indian government has passed approval to banks to open 12 Vostro accounts for trading in rupees with Russia. Six other accounts, five for trade with Sri Lanka and one for trade with Mauritius have also been authorised.
What is the Indian rupee settlement?
On 11 July RBI announced the setting up of a mechanism to carry out international trade in Indian rupees.
The mechanism allows all exports and imports to be denominated and invoiced in the Indian currency while the exchange rate between the trading partners is settled by the market.
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