A meeting with key lenders and the regulator is planned later in the month to address these challenges and renew focus on enhancing rupee trade with surplus trade countries, said officials aware of the developments.
The move gained significance as United States president-elect Donald Trump cautioned the BRICS bloc against transitioning to a new currency replacing the dollar.
“The government is committed to boosting trade with other countries facilitated through bilateral transactions. These efforts are not aimed to undermine any country or currency but to reduce costs and further strengthen bilateral relations by promoting transactions through local currencies,” said an official, requesting anonymity.
At present, the SRVA mechanism is operational with Russia, Sri Lanka, Nigeria, the Maldives, and Myanmar. Another official said that a meeting between different stakeholders, including exporters, was held last month.
“Certain big banks are hawkish about the mechanism and also wary of sanctions. This needs to be addressed as well, and further impetus is required in the opening up of such accounts,” he said, adding that the Reserve Bank of India has also been discussing the issue with other stakeholders including exporters at zonal and central levels.A bank executive said that there are some issues related to the execution of transferring surplus Indian rupees in the SRVA to other foreign currencies and determination of exchange rates. “A more robust dispute resolution mechanism is also required,” he added.Under the SRVA mechanism, transactions are settled with both the local currencies of respective countries. The government has been pushing lenders to speed up and operationalise SRVA accounts, and lenders have also set up designated cells with nodal officers for opening and operations of SRVA.
“Around half of the pre-shipment export credit is in foreign currency. While the rupee mechanism insulates the Indian side and does away with hedging costs and compliance, it impacts profitability,” said a representative of an exporters body, adding that this leaves the other side at a disadvantage because they deal in foreign currency.
Earlier, Trump in a post on social media said, “The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER.”
