Context:
The Indian government has urged banks to promote rupee-based international trade settlements through the Special Rupee Vostro Account (SRVA) system. The move aims to enhance adoption of INR in global trade, especially in light of recent US tariff increases.
Background: US Tariffs Trigger Strategic Shift
- The United States has imposed a 26% tariff on Indian imports, effective April 9, 2025.
- In response, India is accelerating currency diversification in trade settlements to reduce dependence on the US dollar and cut forex transaction costs.
Infrastructure Enhancement: Infinet for Global Use
- The Reserve Bank of India (RBI) is working to open up the Indian Financial Network (Infinet) — currently used for domestic interbank transfers — to international participants.
- This will enable secure fund transfers under the SRVA mechanism and facilitate faster cross-border settlements in INR.
Bilateral Agreements and Expansion
- India has already signed local currency settlement deals with the UAE, Indonesia, and the Maldives.
- More such bilateral agreements are in the pipeline to bolster rupee-based trade ecosystems.
Strategic Goals
- Boosting local currency use in trade will insulate India from global currency shocks and improve economic resilience during tariff wars.
- The government sees this as an opportunity for banks to leverage ongoing geopolitical shifts toward bilateral and multipolar trade frameworks.
Next Steps
- A stakeholder meeting involving the RBI and major banks is likely to be held later this month to address SRVA adoption hurdles.
- Discussions may focus on technical readiness, global bank integration, and compliance facilitation.
