The Reserve Bank of India (RBI) has introduced a series of progressive reforms to Vostro-Nostro account operations, aiming to:
✅ Promote rupee-based international trade
✅ Strengthen India’s position in the global financial system
✅ Streamline trade settlements and encourage foreign participation
These updated norms are especially relevant for Special Rupee Vostro Accounts (SRVAs) — a major step toward rupee internationalisation. Let’s dive into the key highlights and implications.
| 📘 Term | 💬 Meaning |
|---|---|
| Nostro Account | An account Indian banks hold in foreign currency with banks abroad |
| Vostro Account | An account foreign banks hold in INR with Indian banks |
| SRVA (Special Rupee Vostro Account) | Enables rupee-based trade settlement between India and other countries |
🎓 In simple terms:
“Nostro” = Our money in their bank
“Vostro” = Their money in our bank
| 📅 Date | 🔧 Policy Update |
|---|---|
| July 2022 | RBI allows Indian banks to open SRVAs to settle trade in INR |
| Nov 2023 | Banks allowed to open Special Current Accounts for exporters |
| Dec 2024 | 156 SRVAs opened in India across 30 countries |
| May 2025 | RBI proposes lifting the 30% investment cap on government securities via SRVAs |
Settle invoices directly in INR
Avoid exchange rate volatility
Faster settlement process
Promotes the rupee as a global currency
Reduces dollar dependency
Supports bilateral trade with key nations like Russia, Sri Lanka, etc.
Indian importer pays in INR → credited to foreign bank's SRVA
Foreign exporter draws from the SRVA in INR
Funds can be used for:
Investment in Indian G-Secs 💰
Local payments 🏢
Future imports 📥
🎯 This simplifies global trade by enabling rupee-based billing and avoids the need for USD or EUR conversions.
Makes settlement of export proceeds faster & cleaner
Allows exporters to separate export-related funds from other transactions
RBI requested lifting the 30% cap on SRVA balances invested in short-term government securities (like T-bills).
🔹 Why it matters:
Encourages better liquidity management
Attracts foreign institutional interest
Enhances usability of SRVA balances
Enable rupee trade corridors
Allow SRVA usage for:
Capital account transactions
Cross-border lending
Loans to NRIs
Strengthen India’s trade ties without reliance on the dollar
🇷🇺 Russia
🇱🇰 Sri Lanka
🇲🇻 Maldives
🇲🇲 Myanmar
🇰🇿 Kazakhstan
🇧🇩 Bangladesh
🧾 Over 123 foreign banks have opened 156 SRVAs with 26 Indian banks by late 2024.
📌 RBI requires:
Full KYC compliance for foreign correspondent banks
No overdrafts allowed
Live credit balances to be maintained
Proper value dating and settlement records
Russian banks like Sberbank and VTB operate SRVAs in India
Used to settle $4+ billion in defence & oil imports in rupees
Helped Russia bypass SWIFT restrictions
Strengthened bilateral ties 🇮🇳🤝🇷🇺
| 🎁 Stakeholder | 🧩 Key Benefits |
|---|---|
| 🌍 Foreign Banks | Avoid dollar risk, invest in Indian G-Secs |
| 📈 Exporters | Quick rupee settlements, better fund flow |
| 🏢 Indian Banks | Strengthened correspondent ties, better liquidity |
| 💸 Govt. of India | Rupee internationalization, reduced forex burden |
Some countries hesitant to switch from USD
Lack of awareness among smaller exporters/importers
Removing investment caps must be weighed against capital flow risks
Broader SRVA use requires strong governance mechanisms
🌱 Opportunities
Expansion of SRVAs in Africa, Southeast Asia, and the Middle East
Use in tourism, education, and remittances
Digital integration with UPI and cross-border e-wallets
📌 RBI + Finance Ministry need to:
Finalize policy on cap removal
Standardize documentation
Promote awareness and training for stakeholders
The RBI’s updated norms for Vostro-Nostro accounts reflect a bold vision for India’s financial future. Through tools like SRVAs, India is asserting the rupee’s place on the global stage, supporting bilateral trade in an unpredictable currency world.