Sri Lanka: Reports have surfaced claiming that banks from India’s neighboring island nation have opened specialized rupee trading accounts known as Vostro accounts, days after the Central Bank of Sri Lanka (CBSL) stated that it was awaiting the Reserve Bank of India’s (RBI) approval to designate Indian Rupee (INR) as a foreign currency in Sri Lanka.
The RBI had been asked by Sri Lanka to encourage and facilitate tourism and trade within the SAARC area.
Also Read: Stormy Winter Sessions to Begin from Today in Maharashtra, Jharkhand, Karnataka, & MP Assemblies
What does that imply?
It implies that Sri Lankan nationals can now physically hold $10,000 (INR 8,26,823). Additionally, this implies that Sri Lankans and Indians can do international business using Indian rupees rather than US dollars. Since July of this year, the Indian government has been trying to entice nations lacking in dollars to use its rupee settlement system.
Vostro accounts are special rupee accounts used for international trade between certain nations.
Why is Sri Lanka so interested in trading INR?
This is due to the fact that making INR a recognised form of payment in Sri Lanka will give the island nation the much-needed liquidity support it needs to weather its current economic crisis in the face of insufficient US dollar availability.
When investors start selling in home currency, the economy of the country is more likely to prevent further escalation of the balance of payments crisis if it has access to a foreign currency (in Sri Lanka’s case, the INR).
What steps has India taken to internationalise the rupee?
As of now, 12 Vostro accounts can be opened by banks in India in order to do currency exchange business with Russia. According to a Reserve Bank of India document obtained by the Economic Times, six other accounts, including five for trade with Sri Lanka and one for commerce with Mauritius, have also been authorised. Sudan, Tajikistan, Cuba, Luxembourg, and other nations are apparently in discussions about utilising the rupee settlement method.
The Indian Finance Ministry has also requested that the Federation of Indian Export Organizations (FIEO) and the Indian Banks’ Association (IBA) launch an awareness campaign to educate key players about the trading in rupees.
The new system for settling international commerce in the rupee was announced by the Reserve Bank of India in July. This was done in an effort to internationalise the Indian currency as well as devalue the rupee in relation to the dollar.
Keep watching our YouTube Channel ‘DNP INDIA’. Also, please subscribe and follow us on FACEBOOK, INSTAGRAM, and TWITTER