The government has allowed international trade settlements in Indian rupees for export promotion schemes under the foreign trade policy.
Amendments in the foreign trade policy and handbook of procedures have been made to allow for international trade settlement in Indian rupees i.e. for invoicing, payment, and settlement of exports and imports in Indian rupees.
The allowance has been made to allow the grant of export benefits and incentives and fulfillment of the export obligations under the foreign trade policy.
Accordingly, the Directorate General of Foreign Trade (DGFT) had earlier introduced modifications to permit invoicing, payment, and settlements exports and imports in INR in sync with RBI’s Circular issued on 11th July 2022.
In continuation to the above notification, changes have been introduced under the Foreign Trade Policy, for the grant of export benefits, and fulfillment of export obligations under the Foreign Trade Policy, for export realisations in Indian Rupees as per the RBI guidelines, the ministry said in a statement.
“Given the rise in interest in the internationalisation of the Indian Rupee, the given Policy amendments have been undertaken to facilitate and to bring ease in international trade transactions in Indian Rupees,” the Ministry of Commerce & Industry said in a statement.
Earlier in July, the RBI in its notification had explained how the settlement of trade transactions under this arrangement will take place. The central bank said the authorized dealer banks in India have been permitted to open rupee Vostro accounts.
Accordingly, Indian banks need to open special rupee Vostro accounts of correspondent banks of the partner trading country for settlement of trade transactions with any country.
The Indian importers undertaking imports through this mechanism shall make payment in the rupee which shall be credited into the special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller/supplier.
The Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in rupee from the balances in the designated special Vostro account of the correspondent bank of the partner country.