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India’s rupee trade gets a Vostro boost
August 11, 2023
The Indian government on Tuesday announced the approval for banks from 22 partner nations, including Russia and the United Kingdom, to establish “vostro” accounts within India. This move aims to enhance the rupee trade by facilitating international banking services for clients with global banking needs.
A “vostro” account is an account held by domestic banks for foreign banks in the local currency. It serves as a mechanism for domestic banks to cater to the international banking requirements of their clients.
This concept falls under correspondent banking, wherein a bank (or intermediary) conducts wire transfers, commercial transactions, deposit acceptance, and documentation collection on behalf of another bank.
This provision offers local banks increased access to international financial markets and the ability to serve global clients without the need for a physical presence in other countries.
India has actively been urging its partner nations to facilitate trade using the rupee, aiming to reduce the expenses linked with currency conversion during transactions.
Several other countries, including Bangladesh, Russia, Germany, Israel, Uganda, Sri Lanka, the UK, Singapore, and New Zealand, have also established ‘vostro’ accounts to engage in rupee-denominated trade.
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