The Reserve Bank of India (RBI) has approved the opening of a special “vostro account” for commerce in rupees with Russia by state-run Canara Bank Ltd. and prominent private sector lender HDFC Bank Ltd. Vostro accounts are a crucial component of correspondent banking since they are accounts that a bank manages on behalf of another, frequently foreign, bank.
Currency exchange with Russia: Key Points
● Five Indian banks have acquired regulatory approval for rupee transactions. The other three are UCO Bank, Union Bank, and IndusInd Bank.
● Aside from this, the central bank has given its clearance to Sber Bank and VTB, two Russian banks. Both companies have branches in India.
● Following the RBI’s announcement of the rules for offshore rupee trade in July, these Russian banks became the first foreign lenders to gain this approval. These banks have established unique vostro accounts in each of their Delhi branches.
Currency exchange with Russia: RBI Guidelines
● Top bank executives and representatives of trade associations were asked by the RBI and Finance Ministry to promote export and import transactions in Indian rupees in September.
● Due to sanctions put in place by the US and Europe in response to Moscow’s invasion of Ukraine, a significant portion of bilateral trade between India and Russia is being paid in the rupee.
● The opening of the special vostro account clears the way for rupee payments to be settled for commerce between India and Russia, facilitating cross-border trade in the rupee, which the central bank is eager to promote.
● To spread awareness of the new structure, the RBI has permitted the special vostro accounts to invest the surplus balance in Indian government securities.