The Reserve Bank of India (RBI) has made it easier for banks to open Special Rupee Vostro Accounts (SRVAs), a key step to promote international trade in Indian Rupee.
In a circular issued on August 5, the central bank said Authorised Dealer (AD) banks no longer need prior approval from the RBI to open SRVAs for their overseas correspondent banks. This move aims to speed up the opening and use of these accounts, helping facilitate rupee-based trade settlements.
RBI removes prior approval to speed up SRVA openings
The RBI highlights that this decision comes after reviewing the previous process, which required AD banks to seek RBI permission before opening SRVAs. The new guideline allows banks to open these accounts independently.
“Based on a review of the procedure involved in opening of the SRVA, it has been decided to do away with the need for seeking RBI approval for opening of SRVA. AD banks can now open SRVAs of correspondent banks without referring to the Reserve Bank of India,” the RBI said in an official release.
RBI’s push to internationalise the Indian Rupee and reduce reliance on the US dollar
The central bank believes this change will significantly quicken the setting up of SRVAs, making it easier to operationalise trade settlements in rupees.
This step is part of the RBI’s broader goal to internationalise the Indian Rupee and reduce reliance on hard currencies such as the US dollar in bilateral trade.
The SRVA mechanism was introduced in July 2022 to enable exporters and importers to invoice and settle trade in Indian Rupees. The earlier rules mandated RBI approval before opening these accounts. The RBI’s July 11, 2022, notification said, “Before putting in place this mechanism, AD banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai.”
RBI stresses adherence to existing rules
However, the RBI has clarified that banks must still follow all existing regulations and due diligence processes under the Foreign Exchange Management Act (FEMA) and Know Your Customer (KYC) norms.
