Page 93 - BFSI CHRONICLE 3092022.indd

BFSI Chronicle, 11 Edition September 2022
th

for their time and valuable insight. Shri Syamal Ghosh provisions and restrictions. The bank from a partner
Ray in his opening address welcomed the speakers country will approach an AD Bank in India for
and expressed his interest to hear from the eminent opening a special INR Vostro account. The AD Bank
speakers about the RBI Circular and the reason of INR will seek approval from RBI. He said that the rupee is
depreciation in a row. Shri B.Rajkumar delivered a guided by purchasing power parity and it takes care
special address and welcomed the eminent speakers. of the depreciation. So if depreciation in our country
He touched upon the RBI circular for settlement of is higher as compared to the depreciation of a dollar
international trade in INR and requested the esteemed for example in U.S so obviously the differential has to
speakers for in depth analysis. CMA Nijay Gupta be adjusted to the buyer according to the purchasing
made a PPT to illustrate the nitty gritty of international power parity and rupee need to be depreciated. So
trade settlement. In an example he explained the from 75 INR has gone to 80 rupees because of the
international trade settlement in INR where he said inflation difference. CMA Gupta, gave credit to RBI
that now the countries trading with India will have for the fact that exporters in India are getting advance
to open a rupee account without funding it whereas payments from foreign countries due to the latest
earlier rupee was funded by selling the dollars by mechanism of trade settlement.
the overseas bank and this bank will have to sell
the dollars to buy the rupees from this bank and Sri Vikas Babu Chittiprolu, made a PPT wherein he
credit the buyer’s account. i.e. an Indian oil refining explained and refreshed some concepts like direct
company importing from a Russian company pays in /indirect quote, hard/soft currency, ISO etc. he
INR in the Vostro account in an Indian Bank which pointed out few prerequisites for global supremacy.
is opened by the Russian bank with RBI permission They are – 1) the technology and military supremacy,
without funding it. An exporter on the other hand 2) the importance of the country in global value or
exporting to Russian company, the settlement will supply chain, 3) satellite supremacy, 4) the currency
be made as the Russian bank will instruct the Indian acceptability. He explained how the trade is happening
bank with Vostro account to pay the Indian exporter currently with an example and also mentioned that
in INR. So by this the RBI has made the international how it can be changed with the current circular. He
trade settlement much simpler. Previously the explained the usage of excess capital in the Vostro
banks didn’t earn anything and have no investment account. He said that the Indian government had
opportunity for the surpluses lying in that account. promoted bilateral Invoicing and settlement in local
It remained idle but here this bank has been given currency since 2012 in order to provide deeper current
the permission as per the circular, and the bank will account linkages between the trading partners. The
have option to invest in money market instruments key features of the proposal are to facilitate the
like government securities or they can invest money settlement of payment in home currency on a bilateral
with permissions granted under FEMA, for the basis, to promote the use of participant’s currencies
various projects or advance for exports. By this even in transaction between their respective countries, to
if the rupee depreciated by 7% in last 4 or 5 months promote cooperation among the participants and
we are not losing anything. In a nutshell Indian close relationship among the banking systems in
importers importing through this mechanism shall two countries,exporters or sellers of each currency
make payments in INR which shall be credited to the shall denominate the export contracts and invoice in
special Vostro account of the corresponding bank their home currency thereby eliminatin g exchanges.
by a partner country. Indian exporters undertaking So that they can be very competitive in the market.
export thru this mechanism shall be paid in INR from ACU mechanism is already existing since 1985 and
the balances in the designated special Vostro account still it is going from USD move to euro now it has
of the correspondent bank of the partner company. moved to JPY. It was a success story in initial years
The balance in special Vostro account can be used but has lost its charm now. Settlement in INR was
for investment in Govt securities subject to FEMA not allowed except for exports in Nepal and Bhutan

The Institute Of Cost Accountants Of India

93