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Source– This post on Special Rupee Vostro Account (SRVA) is based on the article “Payment mechanism for traders importing pulses from Myanmar simplified: Govt”published in “Economic times” on 16th April 2024.
Why in the News?
India has simplified the payment mechanism for traders importing pulses from Myanmar by facilitating them to use the Rupee/Kyat direct payment system through the Special Rupee Vostro Account (SRVA).
About Special Rupee Vostro Account (SRVA)
1. About: SRVA is an additional arrangement to the existing system of settlement for international trade. It facilitates trade in Indian Rupees (INR) with partner countries.
2. The goal is to promote exports, facilitate imports, and reduce dependence on hard (freely convertible) currencies like the US Dollar or Pound Sterling.
3. Unlike the regular Rupee Vostro Account, SRVA requires prior approval from the Reserve Bank of India (RBI) before opening.
4. SRVA Mechanism:
a) Transactions for both exports and imports must be invoiced exclusively in INR.
b) The exchange rate for converting INR with the partner country’s currency is determined by the market.
c) All trade settlements are conducted in INR.
d) Authorized domestic dealer banks (AD banks), which are permitted to deal in foreign exchange, are responsible for opening SRVA accounts for the correspondent banks in the partner countries.
5. Benefits of SRVA:
a) It reduces dependence on foreign exchanges (like the US dollar).
b) It helps domestic banks gain wider access to foreign financial markets.
c) It also facilitates international banking services without physical presence abroad.
About Vostro account
1. A Vostro account is an account that a domestic bank holds for a foreign bank in the domestic bank’s currency. For eg. in the case of India, it is the rupee.
2. The RBI allowed nine such accounts, including IndusInd Bank and Uco Bank.
UPSC Syllabus: Indian Economy
