RBI Gives Approval To 9 Russian Banks For Opening 'Vostro Accounts' In India?
India¡¯s central bank, the RBI, has given approval for as many as nine special ¡®vostro accounts¡¯ to be opened with some Indian banks to facilitate overseas trade in rupees. "Nine accounts have been opened. One in Uco Bank, one in Sber, one in VTB and 6 with IndusInd Bank. These six are different Russian banks," Commerce Secretary Sunil Barthwal said.
According to a top government official, India's central bank, the RBI, has approved the opening of up to nine special "vostro accounts" with some Indian banks to facilitate rupee trade overseas.
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Initially, Sberbank and VTB Bank, i.e. the largest and second-largest banks of Russia, respectively, were the first foreign lenders to receive approval following the announcement of the guidelines by the RBI on overseas trade in the rupee earlier in July.
Another Russian bank Gazprom, which does not have a bank in India, has also opened this account with the Kolkata-based UCO Bank.
"Nine accounts have been opened. One in Uco Bank, one in Sber and VTB Reach in Russia, and six in IndusInd Bank.These six are different Russian banks," Commerce Secretary Sunil Barthwal told reporters in New Delhi, as per a PTI report. Sunil Barthwal had taken charge as Secretary, Department of Commerce, on September 30, 2022.
Boosting India-Russia Trade
Reuters
The move to open the special vostro account clears the way for the settlement of payments in rupee for trade between India and Russia, thus enabling cross-border trade in the Indian currency, which the RBI is keen to promote.
The RBI has allowed the special vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.
UCO Bank already has a vostro account-based facility in Iran. Gazprombank, or GPB, is a privately-owned Russian lender and the third-largest bank in the country by assets.
Last month, the RBI and India¡¯s finance ministry asked the top management of banks and representatives of trade bodies to push export and import transactions into the rupee. According to the report, they want Indian banks to connect with their foreign counterparts to open special rupee Vostro accounts to facilitate cross-border trade in the Indian currency rather than the more popular US dollar.
On when the rupee trade will begin with Russia, the secretary said there is a process involved in it and hopefully it will materialise soon.
Commerce Secretary Barthwal also said he held a meeting with officials of UCO Bank, RBI, and the Department for Financial Services and discussed ways to promote rupee trade.
"We want to promote rupee trade because that is in the nation's interest. We would also not be looking unnecessarily for dollars. To the extent, Rupee trade is possible, we will go for it," he added.
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A source close to the development told The Hindu businessline ¡°Both the countries are now looking at how Indian exports to Russia could go up and attempts are being made to bring exporters and importers together so that they can strike deals.¡±
Also Read: Russia Was India's Number 1 Oil Supplier In October, Reveals Data
What Are Vostro Accounts?
For the uninitiated, the term Vostro, translated from Latin, means "your," as in your account.? From the foreign correspondent bank's point of view, the funds held on behalf of other banks are referred to as Vostro accounts and are denominated in the local currency.
So, a Vostro account is an account that a correspondent bank holds on behalf of another bank. The bank of a partner country (in this case, Russia) approaches an AD (authorized dealer) bank in India for the opening of a special INR VOSTRO account. The AD bank then seeks approval from the RBI with the details of the arrangement.
Indian exporters undertaking exports of goods and services through this mechanism shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.
And Indian importers undertaking imports through this mechanism shall make payment in INR, which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller or supplier.
Also Read: Do You Know How The RBI Creates & Distributes Indian Rupee Banknotes?
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