Rupee settlement will help India trade with Russia, Iran and S Asian neighbours - experts
Indian rupeee
TheIndian central bank's decision to let importers pay withrupeesandexporters be paid inrupees is likely to maketradeeasier withRussiaandSouth Asianneighbours,andwillhelpa long term goal to internationalise the currency,expertssaid.
On Monday, the Reserve Bank ofIndiasaid it had put in place a mechanism for internationaltradesettlements inIndianrupees (INR) with immediate effect.
The RBI said that "in order to promote growth of globaltradewith emphasis on exports fromIndiaandto support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment,andsettlementof exports/imports in INR."
"This step can be particularly useful for neighbouring countries,andalso those countries willing to use therupeeas a base currency fortradediversification in theirsettlementrules," said Rahul Bajoria, chiefIndiaeconomist at Barclays.
Watch |RBI allows payment for International trade in Rupee
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Engineering Export Promotion Council chairman Mahesh Desai noted the new mechanism "would facilitatetradewith countries under sanctions, likeIranandRussia."
TradebetweenIndiaandRussiahas come to a virtual standstill due to sanctions imposed onRussiaover the war in Ukraine.
The new steps allowIndian exportersandimporters to use specialRupeeVostro Accounts to settletradedenominated inrupees,andbanks will need the RBI's approval to use thesettlementsystem.
"We see this as a first step towards 100 per centconvertibility ofrupee," Desai said, noting it would also reduce currency fluctuation risks for importersandexporters.
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