Explained: International trade settlement in #Rupees and why #RBI is doing it
businessinsider.in/finance/news/w…
By @jainrounak
#RBI’s efforts to keep the #Rupee stable and cut down the use of the US Dollar – a decades-old habit that most of the world seems unable to shake off – has seen an earnest beginning with the central bank now allowing invoicing of international trade in Rupees.
#RupeeVsDollar
What is international trade settlement in #Rupees?
When countries import and export goods and services, they have to make payments in a foreign currency. Since the US Dollar is the world’s reserve currency, most of these transactions are entered into US dollars.
#RupeeVsDollar
Trade settlement in rupees basically means – instead of paying and receiving US dollars, the invoice will be made in Indian rupees. The decision is aimed at easing trade with #SriLanka, which is running low on forex reserves, and #Russia, which cannot make payments in US dollars.
What is a Vostro and Nostro account?
To accept payments in rupees, authorized dealer banks will be able to open special Rupee Vostro accounts.
A #Rupee Vostro account is a foreign bank’s account with an Indian bank in rupees in India.
#RupeeVsDollar #RBI
On the other hand, a Nostro account refers to an Indian bank’s account with a foreign bank in foreign currency in the foreign country. It’s like SBI holding an account with HSBC in London, denominated in British pounds.
#Rupee #RupeeVsDollar #RBI
Why does the #RBI want to settle payments in Rupees?
This move will help reduce India’s dependency on US dollars. Experts @BiIndia spoke to suggested that while this decision won’t have a considerable short-term impact, it will benefit the country in the long-term.
#Rupee
How much will India save with this decision?
According to latest data, India’s imports from Russia stood at $2.5 billion in April and May. This annualizes to $30 billion, and experts suggest it could increase to as much as $36 billion annually.
#Rupee
bfsi.economictimes.indiatimes.com/news/policy/ru…
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