ERGO Analyzes Developments Impacting Business: RBI Trade Notifications | Settlement of international trade in Indian Rupee (INR)


Amid the current geopolitical and economic situation prevailing across the world, and given the continued weakening of the Indian Rupee (INR), the Reserve Bank of India (RBI) empty The circular of July 11, 2022 allowed the international settlement of trade in INR for the export and/or import of goods and services.

This milestone aims to promote the growth of global trade with a focus on India’s exports and to support the growing interest of the global trading community in NRI. This is an additional arrangement for bill payment and export/import settlement and would coexist with the current practice of trade settlement in freely convertible currencies (FOREX). An authorized bank would need approval from the RBI to implement this arrangement. The existing Main Instruction on the Export of Goods and Services and the Main Instruction on the Import of Goods and Services would be applicable to INR subject to this Circular.

Some of the salient features of said circular include:

  • All exports and imports under this agreement can be denominated and invoiced in INR
  • Exchange rates would be determined by the market
  • Settlement of commercial transactions can take place in INR
  • Indian banks will be allowed to open a special Vostro account (SV account) of the correspondent bank of the merchant country
  • In case of import, payments in INR can be credited to the SV account of the correspondent bank, against invoices for the supply of goods or services
  • In case of export, the Indian exporter is paid from the available balance in the SV account of the correspondent bank in the partner country. Advance payment for exports from the SV account is however subject to availability of funds, export orders executed / export payments in progress
  • Advance on export can also be received in INR
  • Set-off of export receivables will also be permitted subject to existing general RBI guidelines


Settling trade through an SV account denominated in INR is a welcome move by RBI, as it would facilitate trade with sanctioned countries like Iran and Russia, where it is increasingly difficult to use the US dollar ( US$) or Euro.

denominated correspondence account for the settlement of exchanges. Trade settlement in INR with countries where India has trade surplus is expected to be successful, but settlement with trade deficit countries would be difficult unless there is strong credit line mechanism is also implemented. RBI must also allow transparent netting of trade payables against service receivables and vice versa for this arrangement to succeed.Further, under this arrangement, the exchange rates would be determined by the market whereas for import and export customs transactions, the exchange rates are notified from time to time by the Central Excise Board. and customs (CBIC) and, therefore, it must be aligned with this arrangement. In addition, most export incentives under the Special Economic Zone (SEZ), foreign trade policy and duty drawback are linked to FOREX, such as a positive net exchange rate (ENF

) under Export Oriented Units / Software Technology Parks of India or SEZ calculated on the basis of realized FOREX. Clarification is required from the authorities that payment received in INR under this arrangement would be considered receipt of FOREX.

We welcome this step as the first bold step to make INR a global currency and over time even capital account transactions can be allowed to make INR truly convertible. This step will also help to reduce transaction costs, as companies will save commissions paid to foreign correspondent banks. [email protected]The contents of this document do not necessarily reflect the views/positions of Khaitan & Co but remain solely those of the authors. For any other questions or follow-up, please contact Khaitan & Co at



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