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Monday, February 6, 2023

Sri Lanka, Russia Discuss Using the Indian Rupee in Trade

Sri Lanka has agreed to use the Indian Rupee in order to help international trade (INR). It happens right after the Indian government said it was looking into ways to include countries that are short on dollars in the trade settlement process using the Indian rupee.

Read More: 1 Billion in Rupees in Words

Use of Rupee in Foreign Trade: Russia and Sri Lanka

  • The Central Bank of Sri Lanka says that the Reserve Bank of India (RBI) has to agree before the Indian rupee can be named Sri Lanka’s official foreign currency (CBSL).
  • Reports say that banks in Sri Lanka have set up Special Vostro rupee accounts (SVRA), which can be used to trade in INR.
  • Also, an island country next to the SAARC region has asked RBI to support and promote both trade and tourism.
  • Since almost a year ago, Sri Lanka has been dealing with a bad economic crisis and a lack of dollars.
  • If the Indian rupee is accepted as legal currency, it will help the island nation get the cash it needs.
  • Vostro accounts make it possible for people in Sri Lanka to hold USD 10,000 (Rs 8,26,823) in cash.
  • Also, Sri Lankans and Indians can do business with people in other countries without using US dollars. Instead, they can use Indian rupees.

Read Also: What You Need to Know about India’s first Digital Currency?

Use of Rupee in Foreign Trade: Key Points

  • Since July of this year, the Indian government has been trying to get countries that don’t have enough dollars to use its rupee settlement system.
  • The Indian rupee trade settlement system lets the Indian rupee be used in place of dollars and other major currencies in all international transactions.
  • On July 11, the RBI announced that it would set up a way for Indian rupees to be used in international trade.
  • Even though the exchange rate between trading partners is set by the market, this method will let all exports and imports be priced and paid for in Indian rupees.
  • The Indian Finance Ministry has also asked the Indian Banks’ Association (IBA) and the FIEO to start an awareness campaign to teach people about the rupee trade.

To Know More: How Much is 1 Billion Dollars in Rupees?

Importers in India must pay in rupees against bills for supplies of products or services from the overseas seller or supplier while using the method. These rupees must be credited to the partner country’s correspondent bank’s Vostro account. Similarly, Indian exporters who utilize this approach to export items and services must be paid the export proceeds in Indian rupees from the leftover balance in a special Vostro account held by the partner nation’s correspondent bank.

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