Case. | photo credit: Reuters
As many as nine special vostro accounts have been opened with two Indian banks after permission from the Reserve Bank of India to facilitate foreign trade in rupees, a senior government official said on Tuesday.
Sberbank and VTB Bank, Russia’s largest and second-largest bank respectively, are the first foreign lenders to receive approval after the RBI announced the rupee’s foreign trade guidelines in July.
Another Russian bank, Gazprom, which does not have a bank in India, also opened this account with UCO Bank, based in Kolkata.
“Nine accounts have been opened. One at UCO Bank, one at Sber, one at VTB and 6 at IndusInd Bank. These six are different Russian banks,” Commerce Secretary Sunil Barthwal told reporters.
The decision to open the vostro special account paves the way for the settlement of rupee payments for trade between India and Russia, enabling cross-border trade in the Indian currency, which the RBI is keen to promote.
The RBI allowed the vostro special accounts to invest the excess balance in Indian government securities to help popularize the new arrangement.
UCO Bank already has a Vostro account in Iran. Gazprombank, or GPB, is a private Russian lender and the country’s third-largest bank by assets.
Last month, the RBI and the Ministry of Finance asked senior bank executives and representatives of trade bodies to push export and import transactions in rupees. They want Indian banks to connect with their foreign counterparts to open special vostro rupee accounts to facilitate cross-border trade in Indian currency rather than the popular US dollar mode.
Regarding the start of the Rupee trade with Russia, the Secretary said that there was a process involved and that it would materialize soon.
Mr Barthwal said he held a meeting with officials from UCO Bank, RBI and Department of Financial Services and discussed ways to promote rupee trading.
“We want to promote rupee trading because it is in the interest of the nation. We also would not be looking for dollars unnecessarily. As far as rupee trading is possible, we will do it,” he said. he added.