Emails that are not meant for me: Settlement of Trade Transactions in Indian Rupees (INR)

Dear Customer,

As per the Reserve Bank of India (RBI) guidelines, receipt and payment in INR from a bank situated in any country other than a member country of the Asian Clearing Union is permissible.

The RBI has permitted an additional arrangement for invoicing, payment and settlement of exports and imports in INR through the ‘Special Rupee Vostro’ Accounts.

Frequently Asked Questions on the settlement of Trade Transactions in INR through the Vostro Accounts.

What is a Rupee Vostro Account?
It is an account opened by the Authorised Dealer (AD) banks in India for their overseas branches or correspondent banks for settlement of trade transactions in INR.
It is an existing arrangement for settlement of cross-border trade transactions in INR permitted by RBI. It is governed by the RBI Master Direction - Risk Management and Inter-Bank Dealings.

What is a ‘Special Rupee Vostro Account’?
A Special Rupee Vostro Account is an account of the correspondent bank/s of the partner trading country opened by AD banks in India for settlement of trade transactions in INR. As per the RBI Circular, dated Jul 11, 2022 on ‘International Trade Settlement in Indian Rupees’ it is an additional arrangement. Opening of Special Rupee Vostro Accounts will require prior permission of RBI.

Who bears the Foreign Exchange (FX) risk for transactions denominated in INR?
The exchange currency between an Indian importer and Indian exporter is INR and the FX risk is always borne by the overseas counter party. The exchange rate between the currencies of the two trading partner countries is market determined.
However, Non-residents can hedge the currency with Indian banks to reduce their FX risk for transactions settled through the Rupee Vostro Account.

How does the settlement of funds take place under the existing Rupee Vostro Account?
Any credit to a Vostro Account is initiated only after confirming the repatriable nature of the transaction. Transfer of funds between the accounts of the same bank or different banks is freely permitted. Balances held in Rupee accounts of non-resident banks may be freely converted into foreign currency.

What are the steps for an Indian exporter/importer for doing trade transactions in INR?

Steps:

1.	Approach your counter parties to accept invoicing in INR
2.	Check for the name of the bank of the counter party
3.	Check with your account manager/corporate ecosystem branch/trade desk for availability of a Vostro Account in ICICI Bank for the bank of the counter party
4.	In case there is an existing Vostro Account at ICICI Bank, finalise the contract in INR and submit documents to the Bank as done currently
5.	In case there is no Vostro Account for the counter party’s bank at ICICI Bank, pursue your counter party to engage with their bankers abroad for opening a Vostro Account with ICICI Bank subject to appropriate approvals and documentation execution as per the policy of both the banks and the prevailing country regulations.

What are the key differences in a traditional ‘Vostro Account’ and ‘Special Rupee Vostro’ Account?

Scenario	Vostro account	Special Vostro account
Opening of account	Without prior reference to the RBI	With prior approval from the Foreign Exchange Department of RBI
Advance against exports	Freely permitted	Permitted with additional checks and due diligence

What are the documents required for settlement of trade transactions through Special Vostro Accounts?
The export and import undertaken and settled in this manner shall be subject to usual documentation as applicable for the settlement of trade transactions.

For further information, contact your Account Manager/Corporate Ecosystem Branch/Trade Desk enabled Branches.

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