Sri Lanka is a dollar-strapped country that has been sanctioned. Russia will be the first country to adopt the Indian rupee trade settlement mechanism, a game-changing move that permits Indian rupees to be used in international transactions instead of dollars and other major currencies.
It comes just days after the Indian government stated that it is looking into ways to get countries that are particularly low on dollars into the Indian rupee trade settlement process.
The Central Bank of Sri Lanka (CBSL) stated that it is awaiting RBI (Reserve Bank of India) approval to designate the Indian rupee as Sri Lanka’s foreign currency.
According to reports, Sri Lankan banks have introduced special rupee trading accounts known as Special Vostro rupee accounts, or SVRA, for trading in INR.
Indian banks are also investigating the possibilities of conducting trade in Indian Rupees with Bangladesh and several African nations to promote the Indian currency as an international currency. Increasing international trading in rupees will protect India’s exports from currency swings.
So far, India’s central bank has authorized banks to open 12 Vostro accounts for rupee commerce with Russia. Six other accounts have also been authorized, including five for commerce with Sri Lanka and one for trade with Mauritius, according to a Reserve Bank of India document reported by the Economic Times. Tajikistan, Cuba, Luxembourg, and Sudan are also said to be discussing implementing the rupee settlement method.
The Indian Finance Ministry has also requested that the Indian Banks’ Association (IBA) and the Federation of Indian Export Organizations (FIEO) launch an awareness campaign to educate stakeholders about the rupee trade.
The Reserve Bank of India announced the new system for settling international commerce in the rupee in July. This was done not only to weaken the rupee versus the dollar but also to internationalize the Indian currency.
Following the Russia-Ukraine war and Western sanctions, India has been attempting to encourage rupee commerce.
