Sri Lanka: Reports claim that banks in India’s neighbouring island nation have opened specialised rupee trading accounts known as Vostro accounts, just days after the Central Bank of Sri Lanka (CBSL) stated that it was awaiting approval from the Reserve Bank of India (RBI) to designate the Indian rupee (INR) as a foreign currency in Sri Lanka.
The RBI had been urged by Sri Lanka to boost and facilitate travel and trade within the SAARC region.
It indicates that Sri Lankans can now physically possess $10,000 (INR 8,26,823). Furthermore, this means that Sri Lankans and Indians can conduct international trade in Indian rupees rather than US dollars. Since July of this year, the Indian government has been attempting to persuade countries that lack dollars to use its rupee settlement method.
Vostro accounts are unique rupee accounts used for international trading between specific nations.
Banks in India can now open 12 Vostro accounts in order to do currency exchange operations with Russia. According to a Reserve Bank of India document acquired by the Economic Times, six more accounts, including five for trade with Sri Lanka and one for business with Mauritius, have also been allowed. Sudan, Tajikistan, Cuba, Luxembourg, and other countries appear to be discussing the use of the rupee settlement method.
The Indian Finance Ministry has also asked the Federation of Indian Export Organizations (FIEO) and the Indian Banks’ Association (IBA) to start a public awareness campaign to educate key participants about rupee trading.
The Reserve Bank of India unveiled the new mechanism for settling foreign trade in the rupee in July. This was done to internationalise the Indian currency while also devaluing the rupee in reference to the dollar.
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