The Strategist

India introduces international trade payments in national currency

07/12/2022 - 08:47

Establishment of a system for rupee-based international trade settlements has been announced by the Reserve Bank of India, which serves as the nation's central bank. Before implementing the method, banks must first receive approval from the Foreign Exchange Department of the Central Bank of India.

It has been decided to introduce an additional procedure for invoicing, payment, and settlement of exports/imports in rupees, according to a statement from the Reserve Bank of India. "This will facilitate growth in global trade with a focus on exports from India and to support the growing interest of the global trading community in rupees," the statement read.

This allows for expression and billing of all export and import transactions covered by the agreement in rupees. The market can choose the rate of exchange between the currencies of the two trading partners. Under the terms of the agreement, trade transactions must be completed in Indian rupees in line with a predetermined process.

For invoices for products or services from a foreign seller or supplier, Indian importers using the new mechanism must pay in Indian rupees, which will be credited to a specific correspondent account of the partner country.

Payments to Indian exporters of goods will be made in rupees from the remaining balances in the correspondent bank's special correspondent account.