VOSTRO
ACCOUNT - ECONOMY
News:
Corporate bonds may get
Vostro funds to boost trade settlement in rupee
What's
in the news?
●
India is considering a plan to allow
surpluses in Special Rupee Vostro Accounts (SRVAs) to be invested in corporate
bonds in order to give a push to international trade settlement in rupees.
Under existing regulations, investment from SRVAs is restricted to government
securities and treasury bills
Vostro
Account:
●
A Vostro account is an account that a domestic bank holds for a
foreign bank in the domestic bank’s currency - which, in the case of India,
is the rupee.
●
The process of SVRAs began in July 2022
when the RBI announced that, “it has been decided to put in place an additional
arrangement for invoicing, payment, and settlement of exports/imports in INR
[Indian rupees].”
Need
for Vostro Account:
●
Trade in local currencies have been mooted
as a solution to avoid the current wave of wartime international sanctions that
are hampering supply chains and global trade flows.
How
does it work?
1. Indian importers could make payment in rupees to the Special Vostro
account of the correspondent bank of the partner country, against invoices
for the supply of goods or services from the overseas seller.
2. Indian exporters shall
be paid proceeds in rupees from the balances in the designated vostro account
of the correspondent bank of the partner country.