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International Trade Settlement in Indian Rupees (INR)

Reserve Bank of India (RBI) has put in place an additional arrangement for invoicing, payment, and settlement of exports / imports in Indian Rupee (INR). 

What does new arrangement entail?

The broad framework for cross border trade transactions in Indian Rupee (INR) under Foreign Exchange Management Act, 1999 (FEMA) is as below –

  • All exports and imports under this arrangement may be denominated and invoiced in INR.
  • Exchange rate between the currencies of the two trading partner countries may be market determined.
  • The settlement of trade transactions under this arrangement shall take place in INR.

How are the transactions processed under new arrangement?

For settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts (SRVAs) of correspondent banks of the partner trading country. 

To allow settlement of international trade transactions through this arrangement, it has been decided that –

  • Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the SRVA of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller / supplier.
  • Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated SRVA of the correspondent bank of the partner country.

Which documents are required under new arrangement?

The export / import undertaken and settled under Rupee Payment Mechanism shall be subject to usual documentation and reporting requirements. Letter of Credit (LC) and other trade related documentation may be decided mutually between banks of the partner trading countries under the overall framework of Uniform Customs and Practice for Documentary Credits (UCPDC) and incoterms. 

What are guidelines on advance payments, set-off and bank guarantees under new arrangement?

  • Indian exporters may receive advance payment against exports from overseas importers in INR through the Rupee Payment Mechanism. Before allowing any such receipt of advance payment against exports, Indian Banks shall ensure that available funds in these accounts are first used towards payment obligations arising out of already executed export orders / export payments in the pipeline. To ensure that the advance is released only as per the instructions of the overseas importer, the Indian bank maintaining the SRVA of its correspondent bank shall verify the claim of the exporter with the advice received from the correspondent bank before releasing the advance.
  • ‘Set-off’ of export receivables against import payables in respect of the same overseas buyer and supplier with facility to make / receive payment of the balance of export receivables / import payables, if any, through the Rupee Payment Mechanism may be allowed.
  • Issue of Bank Guarantee for trade transactions undertaken through this arrangement, is permitted.

How can surplus balance be utilised under new arrangement?

The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in SRVAs can be used for –

  1. Payments for projects and investments.
  2. Export / Import advance flow management
  3. Investment in Government Treasury Bills, Government securities, etc.

(Updated on October 03, 2025)

The surplus balances in SRVAs can be used for investment in non-convertible debentures / bonds and commercial papers issued by an Indian company.

What is approval process under new arrangement?

The bank of a partner country may approach an AD bank in India for opening of SRVA. The AD bank will seek approval from RBI with details of the arrangement. AD bank maintaining the SRVA need to ensure that the correspondent bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.

(Updated on August 05, 2025)

AD banks are allowed to open SRVAs of overseas correspondent banks without referring to RBI for approval.

What are the guidelines on opening additional special current account?

AD Category-I banks maintaining SRVA are permitted to open an additional special current account for its exporter / importer constituent for settlement of their export / import transactions.


References

Reserve Bank of India. (2022, July 11). 'International Trade Settlement in Indian Rupees (INR)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12358&Mode=0

Reserve Bank of India. (2023, November 17). 'International Trade Settlement in Indian Rupees (INR) – Opening of additional Current Account for exports proceeds'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12568&Mode=0

Reserve Bank of India. (2024, June 11). 'International Trade Settlement in Indian Rupees (INR) – Opening of additional Current Account for settlement of trade transactions'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12693&Mode=0

Reserve Bank of India. (2025, August 05). 'International Trade Settlement in Indian Rupees (INR)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12887&Mode=0

Reserve Bank of India. (2025, October 03). 'International Trade Settlement in Indian Rupees (INR)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12910&Mode=0

Reserve Bank of India. (2025, August 05). 'International Trade Settlement in Indian Rupees (INR) – Revised procedure for opening of Special Rupee Vostro Account (SRVA)'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60955

Reserve Bank of India. (2025, October 03). 'Investment in Corporate Debt Securities by Persons Resident Outside India through Special Rupee Vostro account'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12909&Mode=0


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