Context

The Reserve Bank of India (RBI) has introduced significant policy changes to promote rupee trade and reduce reliance on hard currencies like the US dollar. These changes pertain to Special Rupee Vostro Accounts (SRVAs) — a mechanism introduced in 2022 to facilitate international trade settlements in Indian Rupees.

What are Special Rupee Vostro Accounts (SRVAs)?

• SRVAs are bank accounts held in Indian Rupees by foreign banks or entities with Indian banks. They enable overseas buyers to make payments for imports from India in INR, and Indian exporters to receive export proceeds in INR.
• The SRVA mechanism was introduced by RBI in July 2022, especially to support trade with countries facing currency restrictions or US sanctions (e.g. Russia, Iran).
• This mechanism encourages invoicing, payment, and settlement of international trade transactions directly in rupees, thus bypassing the need for dollar or euro payments.

Recent RBI Reforms (August 2025)

The RBI has announced two major updates to make SRVA operations more flexible and attractive:

1. Investment of Surplus Balances:

Non-resident entities holding SRVAs can now invest surplus INR balances in:

• Government of India Securities (G-secs)
• Treasury Bills (T-bills)

This enables productive deployment of funds that would otherwise remain idle.

2. Removal of Prior Approval Requirement:

    Earlier, Authorised Dealer (AD) Banks in India needed prior RBI approval to open SRVAs for foreign entities.

    Now, AD Banks can open SRVAs independently, reducing procedural delays and enhancing ease of doing business.

These measures are expected to speed up operationalisation of SRVAs and promote greater use of the Indian Rupee in global trade.

Objectives Behind These Measures

• To promote internationalisation of the Indian Rupee.
• To reduce reliance on hard currencies like the US Dollar and Euro.
• To facilitate bilateral trade with friendly nations, especially where dollar reserves are limited.
• To attract foreign capital into India’s sovereign debt instruments.
• To improve ease of doing business and procedural transparency in foreign trade settlement.

Benefits of the SRVA Mechanism

1. Boosts Rupee Trade: Encourages trade settlement in INR, reducing demand for USD.
2. Supports Exporters: Ensures quicker settlement for exporters via rupee accounts.
3. Investment Gateway: Enables surplus INR to flow into India’s government bond market.
4. Geopolitical Edge: Helps maintain trade with countries under Western sanctions.
5. Strengthens Monetary Sovereignty: A step towards positioning the Rupee as an international currency.

Reserve Bank of India (RBI)