To boost rupee trade mechanism, two Russian lenders open special vostro accounts
The two largest Russian banks – Sberbank and VTB Banks – opened the accounts after receiving approval from the RBI.
Last month, state-owned bank UCO received approval from the RBI to open a special vostro account with Russia’s Gazprombank.
The Kolkata-based lender, among the first banks to receive regulatory approval following the RBI’s decision to promote rupee settlement, opened the account during this month.
The decision to open the vostro special account paves the way for the settlement of rupee payments for trade between India and Russia, enabling cross-border trade in the Indian currency, which the RBI is keen to promote.
The RBI allowed the vostro special accounts to invest the excess balance in Indian government securities to help popularize the new arrangement.
Reportedly, Gazprombank only faces sectoral sanctions and is not subject to the Specially Designated Nationals, or SDN, sanctions.
UCO Bank already has a vostro account facility with Iran.
Gazprombank, or GPB, is a private Russian lender and the country’s third-largest bank by assets.
Last month, the RBI and the Ministry of Finance had asked senior management of banks and representatives of trade bodies to push export and import transactions in rupees.
They wanted Indian banks to connect with their foreign counterparts to open special vostro rupee accounts to facilitate cross-border trade in Indian currency rather than the popular US dollar mode.
“Indian importers who undertake imports through this mechanism will make payment in INR, which will be credited to the special vostro account of the correspondent bank in the partner country, against the invoices for the supply of goods or services from the seller / supplier stranger,” RBI had said earlier.