India has got responses from up to five countries for rupee settlement mechanism, more interested: RBI deputy governor

Representative image.

India has received responses from four to five countries for its mechanism for international trade settlement in rupees, while other nations have also shown interest, a deputy governor at the Reserve Bank of India said on September 30.

“The response has been fairly good but since the process involves a lot of vetting at the level of banks, at the level of the central bank, at the level of the government, the initial process is taking some time,” T Rabi Sankar told reporters in Mumbai at a post-policy interaction.

Sankar did not respond to a query on whether Russia was one of the countries that was interested in the mechanism.

India had in July announced the new framework which it said aimed to promote growth of global trade and support rising global interest in the rupee.

The rupee has been under an onslaught since Russia’s invasion of Ukraine and, more recently, amid unprecedented monetary tightening by central banks.

The move to facilitate trade settlement in rupees was expected to allow India to bypass sanctions that prevent the use of a global currency such as the US dollar for trade with certain countries.

For instance, Russia’s attack on Ukraine has seen several countries impose sanctions on the former, with the US cutting off Russia’s access to the dollar.

This had made Indian companies, looking to take advantage of the lower price of Russian commodities, consider alternative modes of payment for imports. India has increased its imports of crude oil from Russia in recent months.

As part of the rupee settlement mechanism, banks would need to take RBI’s permission before instituting the rupee trade settlement mechanism.

Exports and imports under the arrangement will be denominated and invoiced in rupees with the exchange rate between the currencies of the two trading partner countries to be market-determined.