Rupee trade settlement gains traction with neighbors

India's endeavors to encourage foreign trade settlements in Indian rupees are yielding results, notably with Bangladesh and Sri Lanka adopting this route initially. Cotton yarn stands as the leading export to Bangladesh, comprising 8.7% of the share, followed by petroleum products at 7%. Sri Lanka receives India's exports worth $5 billion, while imports amount to $1 billion.

Sri Lanka has now incorporated the Indian rupee into its list of designated foreign currencies, and a fresh mechanism was introduced last month with Bangladesh for trade settlement in Indian rupees. Bangladesh, the sixth-largest export market for India, experienced a decline of 27% in India's FY23 exports, totaling $11.6 billion, while imports from Bangladesh reached $2.02 billion, an increase of 2.1% from the previous year.

Trade with Nepal largely utilizes the Indian currency, while all trade with Bhutan is conducted in rupees. To bolster trade in national currencies, a rupee trade mechanism has been initiated with Russia. The Reserve Bank of India (RBI) has approved 34 applications from various Russian banks for opening Special Rupee Vostro Accounts (SRVA) in 14 Indian commercial banks, as of July 2, 2023.

Content source: Media reports