Several banks, including HDFC Bank and UCO Bank, have opened special vostro accounts to facilitate overseas trade in the rupee and many countries have expressed interest to have this arrangement for the local currency trade, a top government official said on Wednesday.
Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi said that the Commerce Ministry is in regular touch with banks, the Department of Financial Services and exporters on the issue.
"As of now there are 20 banks which have opened a special rupee vostro account," he told reporters here. All major banks have shared a list of nodal officers to sort out exporters' issues pertaining to these accounts, he added.
"This is a new initiative, there are teething troubles relating to the exchange rate mechanism, the repatriation of money. So, it has not fully taken off...But we are constantly in touch with the banks, the RBI and our exporters to ensure that it picks up," Sarangi said.
He said that some exporters in Jaipur and other places have started the rupee trade.
Certain African countries that are facing foreign exchange problems and issues with US Dollar and Euro mobilisation are showing interest in the rupee (INR) trade mechanism.
India's neighbours, including Bangladesh, Sri Lanka and Mauritius, are also taking initiative for INR vostro account opening. These accounts are also opened by certain developed countries like Israel and Germany.
The DGFT expressed hope that more countries will come forward for this mechanism.
Commerce Secretary Sunil Barthwal said: "Initially, we were focusing on Russia because they were facing sanctions but now we have been in talks with several other countries".
"We have discussions with some of the African and Gulf countries. They are also interested," Barthwal said.
Opening of several vostro accounts shows that banks are seeing the potential for having a rupee trade, he added.
"The fact that Russian banks have opened accounts, Indians banks have opened accounts shows that there is a potential for rupee trade," the secretary said.
Sberbank and VTB Bank—the largest and second-largest banks of Russia, respectively—are the first foreign lenders to receive the approval after the RBI announced the guidelines on overseas trade in the rupee in July last year.
Another Russian bank Gazprom, which does not have its bank in India, has also opened this account with Kolkata-based UCO Bank.
The move to open the special vostro account clears the deck for settlement of payments in rupee for trade between India and Russia, 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.
Last year, the RBI and Finance Ministry asked the top management of banks and representatives of trade bodies to push export and import transactions in the rupee. They want banks in India to connect with their foreign counterparts for opening special rupee vostro accounts to facilitate cross-border trade in the Indian currency rather than the popular mode of the US dollar.