HDFC Bank, Canara Bank Get RBI Approval for Rupee Trade with Russia

HDFC Bank, Canara Bank Get RBI Approval for Rupee Trade with Russia: HDFC Bank and Canara Bank have got approval from the Reserve Bank of India (RBI) to open a special Vostro account for trade in rupees and both the approvals are for trade with Russia, banking industry sources said.

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This paves the way for cross-border trade in the Indian currency, especially between New Delhi and Moscow. Three other Indian banks — State Bank of India, IndusInd Bank and UCO Bank — had earlier received the necessary permissions from the regulator to roll out rupee trades.

Before this, SBI had said it was opening a special rupee vostro account to handle Russia-related trade settlements. The state-owned lender said it is “making necessary arrangements and processing requests received from various banks, including Russian banks, duly following RBI guidelines”.

How RBI Develop This Mechanism:

In July, the central bank had introduced a new arrangement for settling international trades in rupees. The mechanism, which allows for the invoicing, payment, and settlement of exports and imports in rupees, is designed to promote trade. It would also restrict dollar outflows at a time when the local unit has been depreciating.

Importance Of Vostro Account:

A vostro account is an account a correspondent bank holds on behalf of another bank. These accounts are an essential aspect of correspondent banking in which the bank holding the funds acts as custodian for or manages the account of a foreign counterpart.

Trade With Russia:

As It is known, India has been importing bigger amounts of crude oil from Russia after sanctions imposed on the latter over Ukraine war. As such, enabling importers to pay for buying expensive oil and coal in rupees would help preserve dollar assets.