RBI to open rupee vostro accounts for broader use

NEW DELHI: The Reserve Bank of India (RBI) may permit the use of rupee vostro accounts for a wider variety of transactions, two people aware of the plans said, a move that promises to enhance the utility of these accounts and advances the use of the rupee in cross-border trade.

- Subhash Narayan & Rhik Kundu

A vostro account is held by a domestic bank on behalf of a foreign bank, which can use it to settle forex transactions, make cross-border payments, and make investments in the domestic market, among others. The central bank is likely to come up with a new framework on vostro accounts in the next six months, the people cited above said on the condition of anonymity.

According to one of the two people, the RBI may allow the use of vostro funds in cross-border lending and certain capital account transactions. "Additionally, the central bank is also studying the potential of allowing loans to non-resident Indians (NRIs) from the rupee holdings in these accounts," the person said on the condition of anonymity.