RBI Makes It Easier For Banks To Facilitate International Trade In Rupees By Relaxing SRVA Guidelines

In a push to reduce dependence on the US dollar, the Reserve Bank of India (RBI) has simplified the process for banks to open Special Rupee Vostro Accounts (SRVAs), a key mechanism to facilitate international trade in Indian Rupees (INR).

In a circular dated August 5, the central bank announced that Authorised Dealer (AD) banks no longer require prior RBI approval to open SRVAs for their overseas correspondent banks.

What Is An SRVA?

The SRVA allows for cross-border trade by enabling transactions in INR. Foreign banks can maintain Rupee-denominated accounts with Indian banks for cross-border trade, allowing importers to pay in INR and exporters to receive proceeds directly.

The framework reduces dependence on third-party currencies and improves settlement efficiency. Under this arrangement, trade can be invoiced in INR, exchange rates are market-determined, and settlements are completed entirely in Rupees.

RBI Circular Details

Earlier, banks needed explicit permission from the RBI before initiating these accounts, a process that delayed implementation. The revised guidelines now allow AD banks to independently open SRVAs. While the approval requirement has been removed, the central bank emphasised that banks must continue adhering to all existing regulations.

Rupee Boost

By simplifying SRVA procedures, the RBI aims to promote rupee-denominated trade and improve India’s financial integration with its trading partners. This is a key step in the broader goal of de-dollarising bilateral transactions.

According to reports, RBI has sold at least $5 billion across onshore and offshore markets in August to support the rupee, which recently touched 87.89 per dollar, just shy of its record low, after U.S. President Donald Trump doubled tariffs on Indian goods to 50% on August 6.

The move, reportedly marking the RBI’s most aggressive intervention since January, comes amid concerns that a weaker rupee could fuel imported inflation and pressure economic recovery.

The rupee has already fallen over 2% this year, with half of the decline occurring in the past two weeks. Forex reserves fell by $9.3 billion to $689 billion in the week through August 1, the sharpest drop since November, partly due to valuation effects, the report added.

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