NEW DELHI, Mar 11 : Many developed and developing countries
including Bangladesh, Sri Lanka, and nations of the Gulf region are
keen to start trade in rupee with India as it would help cut transaction
costs for businesses, Commerce and Industry Minister Piyush Goyal has said.
He expressed confidence that the development is going to be a
“very game-changing” dimension to India’s international trade.
“Bangladesh, Sri Lanka are already talking to us and they want
us to start this immediately. Other countries in the Gulf region
are looking at that. I think it’ll take some time for people to see
the benefits. And then we’ll have more and more developed countries
and countries in the Far East also joining the bandwagon. Singapore
is already on board to some extent,” he said.
The minister added that gradually countries are realising that
undertaking trade in domestic currencies has several advantages.
The minister said that it is now picking up traction and a lot
of countries have come forward for this arrangement and are talking
to India for that as they would also like to initiate direct transactions
between their local currency and the rupee.
“Gradually the conscience is setting in that rather than converting
all the transactions into a third currency, both ways, adds significantly
to transaction costs,” Goyal told PTI in an interview.
Undertaking trade in other currencies leads to foreign exchange
and transaction losses as there is a cost for conversion. The delays
in the movement of money also pushed transactors’ costs.
“We started with the UAE. The UAE was one of the first countries
to accept this. It’s now picking up traction. We get a lot of countries
who come and talk to us that they would like to also initiate direct
transactions between the local currency and the rupee.
“It’s a process which takes time. It involves the central bankers
of both nations to create the framework and then it evolves acceptance
by importers and exporters,” Goyal said, adding “when it will take
off, it’ll just fly”.
The engagement is also beneficial as the Indian Rupee is mostly
stable against most of the international currencies and according
to experts, this is one of the reasons that different nations today
want to have trade relations built on rupee trade.
The rupee trade is also helping many of the countries, which have
dollar shortages.
India has started trade in the rupee with neighbouring countries,
including Nepal and Bhutan. The rupee trade mechanism has been initiated
to facilitate trade in national currency with Russia, while Sri Lanka
has included the rupee in its list of designated foreign currencies.
India’s first-ever payment in rupees for crude oil purchased was
from the UAE and that is helping the world’s third largest energy
consumer to push for taking the local currency global, as it looks
for similar deals with other suppliers.
Changes have been made in the FTP (Foreign Trade Policy) to allow
international trade settlement in Indian Rupee with a view to making
INR a global currency.
In July 2022, the Reserve Bank of India (RBI) decided to allow
the settlement of India’s international trade in rupee. Accordingly,
authorised Indian banks are permitted to open and maintain special
rupee Vostro accounts of the partner trading country’s banks.
These accounts keep the foreign bank’s holdings in the Indian counterpart
in rupees. When an Indian trader wants to make a payment to a foreign
trader in rupees, the amount will be credited to this Vostro account.
Similarly, in the reverse scenario, the amount to be paid to an
Indian trader is deducted from the Vostro account, and credited to
the person’s regular account.
Several banks, including HDFC Bank and UCO Bank, have opened special
Vostro accounts to facilitate overseas trade in the rupee and many
countries have expressed interest to have this arrangement for the
local currency trade. (PTI )
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