Q. Consider the following statements:
1.Countries holding rupee accounts can invest in Indian government securities and treasury bills.
2.Vostro account is a type of account held by a government in a domestic bank.
Which of the statement(s) given above is/are correct?
Explanation –
Statement 1 is correct. Countries with bilateral trade settlements in Indian rupees (INR) can invest in Indian government securities and treasury bills through their rupee accounts. The Reserve Bank of India (RBI) added this provision to the Foreign Exchange Management (Debt Instruments) Regulations in 2019. The funds used to purchase securities must come from the rupee account, and any sale or maturity proceeds are credited to the same account.
Statement 2 is incorrect. A Vostro account is a type of account held by a domestic bank (in India) on behalf of a foreign bank. It is not held by a government. A Vostro account enables the foreign bank to provide services to its clients in the domestic bank’s country. For example, a Vostro account held by an Indian bank on behalf of a foreign bank allows the foreign bank’s clients to conduct transactions in India.
Source: The Hindu
