Introduction: The Reserve Bank of India (RBI) has issued a crucial circular, RBI/2023-2024/86, marked as FED Circular No.08, dated November 17, 2023. This directive specifically addresses All Scheduled Commercial Banks holding AD Category-I licenses, introducing a significant development in the realm of international trade settlement involving Indian Rupees (INR).
Detailed Analysis: The circular draws attention to A.P. (DIR Series) Circular No.10, issued on July 11, 2022. It established a framework for invoicing, payment, and settlement of exports/imports in INR through Special Rupee Vostro Accounts of correspondent banks in partner trading countries, maintained with AD Category-I banks in India. This move aimed to streamline and simplify the process, enhancing the efficiency of international trade transactions.
Additionally, AD Category-I banks are reminded of Para 4.1 of circular DOR.CRE.REC.23/21.08.008/2022-23 dated April 19, 2022. According to this provision on the opening of Current Accounts and CC/OD Accounts by Banks, AD Category-I banks, maintaining Special Rupee Vostro Accounts, are now authorized to open an additional special current account. This account is exclusively dedicated to the settlement of export transactions, providing exporters with greater operational flexibility.
The rationale behind this initiative is to empower exporters, allowing them to manage and facilitate their export transactions more efficiently. By creating an additional special current account, RBI aims to contribute to the growth of exports and further strengthen the nation’s international trade position.
Conclusion: In conclusion, the RBI’s recent circular marks a significant step in fostering a conducive environment for international trade involving INR. The permission granted to AD Category-I banks to open an additional special current account for exporters demonstrates a commitment to simplifying processes and enhancing flexibility. This move not only aligns with global trade trends but also positions India as a more attractive destination for international business. As the Chief General Manager, Puneet Pancholy, affirms in the circular, this measure aims to contribute to the operational ease of exporters. Scheduled Commercial Banks should leverage this opportunity to empower their exporter constituents and catalyze growth in India’s export sector.
Reserve Bank of India
FED Circular No. 08 Dated: November 17, 2023
All Scheduled Commercial Banks (holding AD Category-I license)
International Trade Settlement in Indian Rupees (INR) – Opening of additional Current Account for exports proceeds
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No.10, issued on July 11, 2022, in terms of which an additional arrangement has been put in place for invoicing, payment, and settlement of exports/imports in INR through Special Rupee Vostro Accounts of the correspondent bank/s of the partner trading country maintained with AD Category-I banks in India.
2. Further, attention of AD Category-I banks is invited to Para 4.1 of circular DOR.CRE.REC.23/21.08.008/2022-23 dated April 19, 2022 on Opening of Current Accounts and CC/OD Accounts by Banks. In terms of this provision and in order to provide greater operational flexibility to the exporters, AD Category-I banks maintaining Special Rupee Vostro Account as per the provisions of the Reserve Bank circular dated July 11, 2022 referred above are permitted to open an additional special current account for its exporter constituent exclusively for settlement of their export transactions.
Chief General Manager