The Reserve Bank of India (RBI) on Monday allowed HDFC Bank Ltd and Canara Bank Ltd to open a special “vostro account” for trade in Rupees with Russia, according to media reports.
Vostro accounts are accounts a bank holds on behalf of another, often foreign bank, and this forms a key part of correspondent banking.
The move to open the special vostro accounts clears the deck for settlement of payments in Rupee for India-Russia trade, enabling cross-border transactions in the Indian Currency.
Earlier, the government had opened nine special vostro accounts with two Indian banks after permission from the Reserve Bank of India (RBI) to facilitate overseas trade in Indian Rupee. Sberbank and VTB Bank-the largest and second-largest banks of Russia respectively-were the first foreign lenders to receive approval after the RBI announced the guidelines for overseas trade in the Rupee in July.
Another Russian bank Gazprom, which does not have its bank in India, has also opened this account with Kolkata-based UCO Bank.
“Nine accounts have been opened. One in UCO Bank, one in Sber, one in VTB and six with IndusInd Bank. These six are different Russian banks,” commerce secretary Sunil Barthwal had said while releasing trade data.
The RBI has allowed these special vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.