Now, Foreign Trade can be settled in Indian Rupees (INR).
How this mechanism will work?
Step -1 Countries must express interest in Rupee Trade.
Step -2 Foreign Banks open accounts in India, Indian Banks open accounts abroad, Both sides maintain reserves in local currency.
Step -3 Trade begins. Foreign countries pay in their local currency. Payments deposited in their Indian Bank account.
Step -4 Payment will be calculated in Rupee based on market rates. Then, Banks will pay Indian Traders in Rupees.
So, effectively, this system means Indian exporters get paid in Indian Rupees and Indian importers pay in Indian Rupees.
Now, next point is how this system will benefit India?
1. Bolster the Rupee
2. Protect Forex Reserves
3. Easier trade with struggling regimes such as Russia, and Sri Lanka
4. Beyond all, This system will globalize the India Rupee.
Same said by RBI circular “In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports / imports in INR. 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.”
Copy of RBI Circular is also attached for complete process.
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