The Reserve Bank of India (RBI) has issued a circular to all Authorised Dealer Category-I banks (AD banks) allowing greater flexibility for investing surplus funds held in Special Rupee Vostro Accounts. Previously, the balance in these accounts, established for the International Trade Settlement in Indian Rupees (INR) scheme, could be used for investment in instruments like Government Treasury Bills and Government securities. This new direction expands the permissible investment avenues, permitting AD banks to now also allow investment of surplus balances in non-convertible debentures/bonds and commercial papers issued by Indian companies. This change is effective immediately and is subject to the guidelines and limits detailed in the referenced circular dated October 3, 2025. The instruction is issued under the powers conferred by the Foreign Exchange Management Act (FEMA), 1999, to facilitate the operational aspects of the INR trade settlement mechanism.
RESERVE BANK OF INDIA
RBI/2025-26/91
A.P. (DIR Series) Circular No. 14 Dated: October 03, 2025
To,
All Authorised Dealer Category-I banks
Madam / Sir,
International Trade Settlement in Indian Rupees (INR)
Attention of Authorised Dealer Category – I banks (AD banks) is invited to Para 8(c) of A.P. (DIR Series) Circular No.10 dated July 11, 2022 wherein it has been indicated that the balance in Special Rupee Vostro Accounts can be used for: ‘Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provision’.
2. In the light of the directions issued through AP DIR Circular No.13 dated October 03, 2025, AD banks may permit investment of surplus balances in the Special Rupee Vostro Accounts also in non-convertible debentures/bonds and commercial papers issued by an Indian company in terms of guidelines and limits prescribed vide the referred circular dated October 03, 2025.
3. The above instruction is applicable with immediate effect. AD banks may bring the contents of this circular to the notice of their constituents and customers concerned.
4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Latha Radhakrishnan)
General Manager-in-Charge
