The central government has made changes to the Foreign Trade Policy 2015-22 also to allow for rupee settlement of international trade for export promotion schemes immediately.
Given the rise in interest in internationalization of Indian Rupee, this Policy amendments have been undertaken to facilitate and to bring ease in international trade transactions in Indian Rupees, for Indian EXIM business entities.
Further, the changes have been notified
1. for imports
2. for exports,
3. export performance for recognition as Status Holders,
4. realisation of export proceeds under advance authorisation & Duty-Free Import Authorisation schemes,
and
5. realisation of export proceeds under export promotion capital goods scheme.(EPCG).
The changes mean benefits, incentives, and fulfilment of export obligation under the Foreign Trade Policy can be extended to export payments made in Indian rupees, as outlined by the Reserve Bank of India (RBI) on 11th July 2022 wherein it had announced the setting up of a mechanism to settle global trade in rupees.
Under the mechanism, all exports and imports may be denominated and invoiced in rupees, with the exchange rate between the currencies of the two trading partner countries to be market determined.
To settle these transactions, authorised Indian banks have to open Special Rupee Vostro Accounts of correspondent banks of the partner trading country.
While the mechanism is yet to see its first transaction, as a first step forward, UCO Bank and YES Bank had joined hands with Russian lenders under the framework.
RBI Deputy Governor T Rabi Sankar said in a speech on October 20 that it was receiving "encouraging response" from countries to participate in rupee-based trading.
Well......
Though stake holders may be wary of the mechanism on fears that they could face sanctions from Western nations should they enter into agreements with Russian entities, the move to allow settlement of trade in Indian rupees came amid increasing pressure on the Indian currency in the wake of Russia's invasion of Ukraine in late February.
However, with the might of growing Indian Economy, in comparison with world economic growth, this move will be receiving "encouraging response" from a large number of countries to participate in rupee-based trading.
