Background
In 2022, the Reserve Bank of India (RBI) permitted foreign banks to open Special Rupee Vostro Accounts (SRVAs) to enable trade settlements in Indian Rupees (INR). This move was part of a broader strategy to promote the “internationalisation” of the rupee.
What is an SRVA?
A Special Rupee Vostro Account (SRVA) is a rupee-based account maintained with an Authorised Dealer (AD) Category-I bank in India on behalf of a foreign bank or entity. It allows international entities to carry out trade transactions directly in Indian Rupees.
Regulatory Compliances
According to RBI guidelines, SRVAs operate under the Foreign Exchange Management Act (FEMA) and are subject to Know Your Customer (KYC) requirements. Earlier, Indian AD Category-I banks had to obtain prior approval from the RBI before opening SRVAs for overseas correspondent banks.
Treatment of Surplus Funds
Previously, if surplus balances accumulated in SRVAs, foreign banks needed to register as Foreign Portfolio Investors (FPIs) with the Securities and Exchange Board of India (SEBI) in order to invest these funds in Indian capital markets.
Development: RBI’s Announcement
On 05 August 2025, the RBI announced that AD Category-I Banks can now open SRVAs for overseas banks without seeking prior approval, while all other regulatory norms remain applicable.
Further, on 12 August 2025, the RBI allowed SRVA holders to invest surplus rupee balances in Central Government Securities (G-secs), including Treasury Bills (T-Bills), within specified limits. The guidelines mandate that proceeds from matured securities and any interest earned be credited back to the same SRVA, ensuring the funds stay available for trade settlements or reinvestments.
Key benefits of the development
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- SRVA holders can now deploy their surplus balances more effectively by investing in risk-free G-secs and Treasury Bills, thereby earning returns.
- The step supports the rupee’s global reach by enabling foreign entities to access India’s government securities market without needing FPI registration.
- It encourages cross-border trade settlements in Indian rupees, reducing reliance on the US dollar and cutting foreign exchange transaction costs.
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How India–UAE trade relations can benefit
By promoting the use of the rupee in cross-border trade and simplifying the settlement mechanism, this step will boost efficiency and reinforce the resilience of the India–UAE trade corridor, bringing advantages to businesses on both sides. Conducting oil trade with the UAE directly in rupees, without relying on a third-party currency like the dollar, will also align with India’s wider strategy and strengthen its energy trade ties with countries such as Russia. For businesses looking to establish and expand their presence in such evolving trade environments, partnering with a Company Registration consultant in India can ensure smooth market entry and regulatory compliance.
