The Reserve Bank of India (RBI) has announced a major reform in cross-border trade settlements by streamlining the process of opening Special Rupee Vostro Accounts (SRVAs). Authorized Dealer (AD) banks can now open SRVAs of correspondent banks on their own initiative without seeking prior approval from the central bank. The new directive takes immediate effect.
Facilitating Faster Settlements
SRVAs play a crucial role in enabling invoicing, payments, and settlements of exports and imports conducted in Indian Rupees. By eliminating procedural delays, the RBI aims to accelerate account openings and provide banks with greater operational flexibility. This step is expected to benefit both importers and exporters by ensuring smoother and faster settlements.
The Role of SRVAs in Trade
Introduced by the RBI in 2022, the SRVA framework allows foreign banks to hold Rupee-denominated accounts with Indian banks to facilitate trade. This mechanism reduces dependence on third-party currencies, particularly the US dollar, and enhances financial stability. Exporters receive proceeds directly from SRVAs, while importers make payments in INR, creating a streamlined and efficient process.
Strengthening Bilateral Trade
By easing account opening procedures, the RBI expects to support Indian businesses in global trade, foster stronger bilateral ties, and provide a cost-effective alternative to traditional currency settlements. The move is particularly relevant as India navigates global trade uncertainties, including tariff-related challenges from the United States and volatility in international markets.
Supporting India’s Economic Strategy
Experts believe that this reform complements India’s long-term strategy of promoting the Rupee as a viable trade currency. By empowering banks and reducing red tape, the RBI has taken another step toward reinforcing India’s position in global trade, while also safeguarding exporters and importers from currency-related risks.
