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Exporters looking for list of countries permitting settlement of exports and imports in Indian rupee
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Laxmi Yadav, Mumbai
September 20 , 2022
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Even as the Union commerce ministry has permitted invoicing, payment and settlement of exports and imports in Indian rupee with an aim to facilitate international trade in domestic currency, the pharmaceutical manufacturers and exporters have urged the government to come out with a list of countries allowing settlement of exports and imports in Indian rupee.
Besides this, they are also looking for clarity on applicability of export benefits to do costing for exports under Indian Rupee as well as clarification regarding acceptance of export obligation in Indian rupee against imports made in free foreign currency.
In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in rupees, the Reserve Bank of India (RBI) came out with a circular on July 11, 2022 stating that it has decided to put in place an additional arrangement for invoicing, payment and settlement of exports/imports in rupees. Before putting in place this mechanism, authorised dealer (AD) banks shall require prior approval from the RBI.
The Directorate General of Foreign Trade (DGFT) on September 16, 2022 inserted paragraph 2.54(d) under the Foreign Trade Policy (FTP) to permit invoicing, payment and settlement of exports and imports in Indian rupee in sync with RBI's circular dated July 11, 2022. This shall come into force with immediate effect.
Accordingly, settlement of trade transactions in INR may also take place through special rupee vostro accounts opened by authorised dealer banks in India, stated a circular issued by DGFT.
As per the newly inserted para 2.54(d), Indian importers undertaking imports through this mechanism will make payment in INR which will be credited into the special vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller/supplier.
"Indian exporters undertaking exports of goods and services through this mechanism shall be paid the export proceeds in INR from the balances in the designated special vostro account of the correspondent bank of the partner country," it stated.
Commenting on the government’s decision to allow settlement of international trade in domestic currency, Sandeep Modi, Joint secretary, Federation of Pharmaceutical and Allied Products Merchant Exporters (FPME) said, “The exporters are encouraged by the DGFT’s notification permitting exports-imports in INR but the government needs to come out with a list of countries permitting trade settlement in Indian rupee to help us boost our exports.
Modi also pointed out lack of clarity on applicability of export benefits on trade settlement in INR.
Furthermore, a significant number of exporters have imported goods under several schemes including Advance Authorization. They are also looking for clarity on acceptance of export obligation in INR against imports made in free foreign currency, he said.
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