Trade in rupee: A little step forward but nothing more

Transactions in INR shift entire exchange rate risks to the foreign party. It is difficult to fathom why any foreign trader would agree to that

Last Monday, the Reserve Bank of India (RBI) introduced an additional mechanism for invoicing, payment, and settlement of exports/imports transactions in Indian rupee (INR). It is a little step forward but nothing more.

Banks in India are already permitted to open INR Vostro Accounts for foreign banks through which inward and outward remittances are put through for individual and trade transactions. The INR in these accounts are convertible and exporters can get their incentives such as duty drawback, etc. for getting payments through debit to such accounts.

The new arrangement allows Indian banks to open Special Vostro Accounts (SVA) in INR for