RBI, in 2022, allowed foreign banks to open special accounts of Rupias (SRVA) to resolve commercial transactions in the rupe as part of their efforts to increase the “internationalization” of the coins | Photo credit: Francis Mascarenhas
The Bank of the Reserve of India (RBI) has sought the approval of the Government to eliminate the limit of foreign banks with the so -called vostro accounts that buy sovereign debt in the short term, to boost the investment and trade called rupees, according to two sources and a letter observed by Reuters.
Vostro accounts are usually heroes by a National Bank on behalf of a foreign bank in which commercial partners can celebrate balances called rupees that arise from commercial transactions.
RBI, in 2022, allowed foreign banks to open special accounts of Rupias (SRVA) to resolve commercial transactions in the rupe as part of their efforts to boost the “internationalization” of the currencies.
The holders of such accounts can invest in the Indian government debt without registering as foreign portfolio investors (FPI), as investors abroad have to do. However, the government slapped a limit of use of only 30 percent of account balances to buy residual expiration values below one year, including treasure invoices.
“The restriction intended to promote long -term capital flows and guarantee financial stability. (But) The 30 percent limit is an important obstacle to entities that seek to use SRVA, especially to administer the merchant in the short term.
According to the comments of the hollows of the Vostro account, this limit must be eliminated, the RBI incoming to the Federal Ministry of Finance in a letter last month.
Athegh This limit serves as a prudential measure for FPI investments, is a significant obstacle for HRVA holders of SRVA, since their investments are usually short -term nature and destined to be used or repatriated quickly, said the RBI.
The final decision falls to the Ministry.
The second source said that a specific relaxation could encourage a broader participation in the SRVA framework and help advance in the objective of the “internationalization” of the Rupia of India.
The Central Bank and the Ministry of Finance did not respond to a Reuters email for comments. The two sources refused to be identified since the discussions are private.
The RBI approved 123 corresponding banks from 30 commercial partners to open 156 SRVA with 26 Indian banks to promote bilateral trade in local currencies, said a junior trade minister earlier this year.
The combined balance in all Vostro accounts, including SRVA, was $ 1.60 billion or December 2024.
In January, the RBI allowed the abroad branches of authorized banks to open break accounts for anyone who resides outside India and seek to resolve current and capital transactions with someone who lives in the country.
It also allowed Indian exporters to open currency accounts abroad for commercial payments.
More like this
Posted on May 2, 2025