Ugandan importers can pay for Indian goods in rupees as option to US dollarTo carry out these transactions, authorised Indian banks have to open Special Rupee Vostro accounts of correspondent banks of the partner trading country.
The Reserve Bank of India (central bank) recently placed Uganda on a list of 18 countries (six from Africa) allowed to pay for Indian goods using rupees as an alternative to the US dollar.
The other five African countries are Botswana, Kenya, Mauritius, Seychelles and Tanzania while Fiji, Germany, Guyana, Israel, Malaysia, Myanmar, New Zealand, Oman, Russia, Singapore, Sri Lanka, and the United Kingdom are also listed.
However to carry out these trade transactions, authorised Indian banks have to open Special Rupee Vostro accounts of correspondent banks of the partner trading country and in Uganda’s case none has yet to formalize the arrangement. Uganda’s two leading imports from India are pharmaceuticals, motor cycles and industrial machinery.
During mid-2022, the RBI began implementing this payment option after issuing a circular. According to the circular, Special Rupee Vostro accounts of correspondent banks of the partner trading country can be opened in India for settling trade transactions. A Vostro account is a bank account held by a domestic bank for a foreign bank, denominated in the domestic currency of the former.
Indian importers can pay rupees into the Special Vostro account for imported goods and exporters will be paid in rupees from the balance. The arrangement will also allow Indian exporters to receive advance payment in rupees against exports from importers abroad. Issuing bank guarantees for trade transactions will also be permitted. Import and export transactions settled through rupee Vostro accounts are still subject to the usual reporting and documentation requirements.