Banks told to push global trade settlement in Rupee

The government has asked banks to nudge their clients to settle international trade in Indian rupees and is in discussion with them on removing hurdles hindering faster adoption of the special rupee vostro account (SRVA) mechanism, which enables settlement in INR.

The Reserve Bank of India is working to make the Indian Financial Network (Infinet), which is currently used for domestic interbank transactions, accessible to international participants to facilitate secure fund transfers through SRVA, officials aware of the developments said.

These initiatives are part of the various strategies being pursued to deal with the reciprocal tariffs imposed by the US, they said.

The US has imposed a 26% tariff on imports from India, to be effective from April 9.

Enabling international trade settlement in the Indian currency will reduce dependency on the US dollar and bring down foreign exchange costs besides facilitating faster cross-border transactions.

"As countries explore options towards more bilateral trade because of the ongoing tariff wars, there is a case for faster adoption of local currency settlements, and we want lenders to take advantage of this opportunity," a government official told ET.

A meeting on this issue with all stakeholders, including the RBI, may be held later this month, the person said.

The central bank has already established local currency settlement arrangements with the United Arab Emirates, Indonesia, and the Maldives, and the government has indicated more such agreements soon, a bank executive said.