RBI Permits Foreign Vostro Account Holders To Invest Surplus Rupees in Indian Government Securities

The Reserve Bank of India (RBI) has announced that persons resident outside India who hold special rupee vostro accounts for international trade settlement may now invest their surplus rupee balances in government securities, such as treasury bills, according to a press release from the central bank.

The measure broadens investment opportunities for foreign entities in rupee-denominated trade settlements and seeks to strengthen the Indian currency’s appeal in international markets, NDTV Profit reported.

Launched in July 2022, the special rupee vostro account framework was designed to facilitate settlement of cross-border trade in Indian rupees by allowing overseas banks to maintain rupee accounts with Indian financial institutions.

This arrangement enables exporters and importers to settle transactions in the Indian rupee, thereby reducing dependence on hard currencies such as the US dollar.

The RBI has instructed Authorised Dealer Category-I banks to notify their eligible customers of the new investment provision.

The operational details have been added to the revised master direction on non-resident investment in debt instruments, which takes effect immediately.

The measure is expected to direct unused rupee balances toward the Indian government securities market, potentially increasing demand for sovereign debt and supporting the ongoing internationalisation of the rupee.

Also Read: RBI Announces Measures For International Trade Settlement In Rupees