Special Rupee Vostro Accounts (SRVA)

Special Rupee Vostro Accounts (SRVA) are a strategic initiative by the Indian government, involving 20 Russian banks opening accounts with partner banks in India.

What is the SRVA Arrangement?

• Special Rupee Vostro Accounts (SRVA) are accounts that domestic banks hold for foreign banks in the former’s domestic currency, in this case, the rupee.
• Serves as an additional and complementary system to the existing banking arrangements that use freely convertible currencies like the US dollar and the pound.
• Allows for settling international transactions directly in INR instead of relying on foreign exchange.

Framework of SRVA

The arrangement involves three critical components: invoicing, exchange rate, and settlement.

• All exports and imports must be invoiced in INR.
• The exchange rate for transactions is determined by the market.
• Final settlement of transactions also occurs in INR, facilitating easier and more direct trade.

Functioning of SRVA

• SRVA accounts are opened by authorized Indian banks for corresponding foreign banks to facilitate transactions.
• Payments for imports into India and receipts for exports from India are conducted in INR through these accounts.
• Indian exporters can receive advance payments in INR, enhancing financial stability.
• All transactions are reported in compliance with the Foreign Exchange Management Act (FEMA), 1999.

Purpose of the SRVA Arrangement:

• Reduces demand for foreign currencies: Decreases reliance on the U.S. dollar for settling trade, thereby reducing the overall demand for foreign exchange.
• Mitigates economic shocks: Reduces vulnerability to external economic fluctuations by minimizing dependency on foreign currencies.
• Promotes the Indian Rupee internationally: Aims to elevate the status of the INR as a globally accepted currency.
• Facilitates trade with sanctioned countries: Improves payment processes with countries like Russia, maintaining trade flows despite sanctions.

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