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RBI lays down framework for trade settlement in Indian rupee

In order to promote the growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in Indian rupee, the Reserve Bank of India has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in rupee.

Before putting in place this mechanism, all category-I authorised dealer (AD) banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office in Mumbai, the RBI stated.

The broad framework for cross border trade transactions in INR under Foreign Exchange Management Act, 1999 (FEMA) is delineated: All exports and imports under this arrangement may be denominated and invoiced in rupee. The exchange rate between the currencies of the two trading partner countries may be market-determined.

AD bank in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country.

Indian importers undertaking imports through this mechanism shall make payment in the rupee 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 /supplier. Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in rupee from the balances in the designated Special Vostro account of the correspondent bank of the partner country. Letter of Credit (LC) and other trade related documentation may be decided mutually between banks of the partner trading countries under the overall framework of Uniform Customs and Practice for Documentary Credits (UCPDC) and incoterms.

Indian exporters may receive advance payment against exports from overseas importers in Indian rupees through the above Rupee Payment Mechanism. The Indian bank maintaining the Special Vostro account of its correspondent bank shall verify the claim of the exporter with the advice received from the correspondent bank before releasing the advance.

PR Newswire

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