Reserve Bank of India (RBI) 

Why in News?

• Recently, The Reserve Bank of India (RBI) has allowed the opening of nine special vostro accounts in two Indian Banks (UCO Bank and IndusInd Bank) for the settlement of payments in rupee for trade between India and Russia.

Highlights

• Russia’s two largest banks — Sberbank and VTB Bank — are the first foreign lenders to have received approval from the RBI towards settling international trade transactions in rupee.
• A Vostro account Is just another name for a Nostro account. It is an account held by a bank that allows the customers to deposit money on behalf of another bank.
• Authorized Dealer Banks in India had been permitted to open Rupee Vostro Accounts.
• Indian importers undertaking imports via this mechanism will make payment in INR which will be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller.
• Indian exporters using the mechanism will be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.
• Indian exporters may receive advance payment against exports from overseas importers in Indian rupees through the above Rupee Payment Mechanism.
• Before allowing any such receipt of advance payment against exports, Indian banks need to ensure that available funds in these accounts are first used towards payment obligations arising out of already executed export orders/export payments in the pipeline.
• Balance in Special Vostro Accounts can be used for: payments for projects and investments, export/ import advance flow management, and investment in Government Treasury Bills, Government securities, etc.