The Reserve Bank of India (RBI) has announced a significant policy change allowing foreign traders’ surplus rupee funds held in Special Rupee Vostro Accounts (SRVA) to be invested in Government Securities (G-Secs) and Treasury Bills (T-Bills). The decision aims to enhance the attractiveness of international trade settlement in Indian Rupees (INR) and provide partner countries with more avenues to utilise their rupee holdings.
What Are Special Rupee Vostro Accounts (SRVAs)?
A Special Vostro Account is an account maintained by a domestic bank on behalf of a foreign bank, used for trade settlements in INR. Under the International Trade Settlement in INR mechanism, partner countries can settle import and export transactions directly in rupees, reducing reliance on third-party currencies like the US dollar.
Key Highlights of RBI’s New Guidelines
Investment Options for Surplus Funds
Surplus rupee balances in SRVAs can now be invested in:
- Government Securities (G-Secs)
- Treasury Bills (T-Bills)
Immediate Implementation
- The new rules are effective immediately.
- RBI has issued operational guidelines to Authorised Dealer (AD) Category-I banks.
Permissible Uses of SRVA Balances
- Payments for projects and investments
- Export/import advanced flow management
- Other permissible capital and current account transactions as per mutual agreements.
Opening an SRVA
A partner country’s bank must approach an AD bank in India.
The AD bank will seek RBI approval with complete arrangement details.
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Compliance with FATF Guidelines
The correspondent bank must not be from a country listed in the FATF’s High-Risk & Non-Cooperative Jurisdictions requiring countermeasures.
Why This Move Matters
- Boost to Rupee Internationalisation: Encourages more countries to trade in INR by offering secure investment options.
- Liquidity Management: Allows surplus funds to be parked in safe, interest-bearing instruments.
- Economic Benefits: Increases demand for Indian government securities, supporting the domestic bond market.