Overview

• On August 12 the RBI updated its master direction to let persons outside India holding special rupee vostro accounts invest excess balances in Indian government securities and treasury bills.
• Banks categorized as AD category-1 can now open special rupee vostro accounts without prior RBI approval, a change instituted on August 5 to accelerate trade settlements.
• The SRVA framework supports rupee-based payments for oil imports from Russia by reducing reliance on dollar conversions and lowering transaction costs.
• Structural frictions persist due to rupee buildup with Russian exporters, fluctuating rouble rates, exporters’ preference for dollar receipts and constraints from Western sanctions on messaging networks.
• Regulators are developing market mechanisms for dynamic rupee-rouble exchange, exploring alternative financial messaging systems and discussing trilateral settlement routes via the UAE to address operational hurdles.