TaxTMI 
TaxTMI 
Special Rupee Vostro Account (SRVA)
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....pecial Rupee Vostro Account (SRVA)<br>By: - YAGAY andSUN<br>FEMA - Foreign Exchange Management<br>Dated:- 16-7-2025<br>A Special Rupee Vostro Account (SRVA) is a designated account that enables foreign entities to settle transactions in Indian Rupees (INR) with Indian banks. The SRVA is part of India's broader strategy to promote the use of the Indian Rupee in international trade, especially with countries where foreign exchange reserves are limited or there are challenges in converting local currencies to major international currencies like the US Dollar or Euro. Legal and Regulatory Framework: * RBI Guidelines: The Reserve Bank of India (RBI) regulates the Special Rupee Vostro Account. The RBI provides specific guidelines on how fo....
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....reign banks can open and operate such accounts in India, ensuring compliance with the country's foreign exchange and monetary policies. * FEMA Compliance: The operation of SRVAs is governed under the Foreign Exchange Management Act (FEMA), 1999. The RBI ensures that these accounts are used strictly for the purpose of facilitating trade and do not serve as avenues for speculative transactions or illicit financial activities. * Approval Process: A foreign bank needs to obtain approval from the RBI before opening an SRVA with an Indian bank. This process includes checks for the bank's credibility, the purpose of the account, and the trade relations between the countries involved. * Foreign Exchange Management (Deposit) (Fifth Amendme....
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....nt) Regulations, 2025. * Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Fifth Amendment) Regulations, 2025. * Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) (Third Amendment) Regulations, 2025. * RBI/2024-2025/43 FED Circular No. 11 June 11, 2024 International Trade Settlement in Indian Rupees (INR) - Opening of additional Current Account for settlement of trade transactions. * RBI/2023-2024/86 FED Circular No.08 November 17, 2023 International Trade Settlement in Indian Rupees (INR) - Opening of additional Current Account for exports proceeds. * RBI/2022-2023/90 A.P. (DIR Series) Circular No.10 July 11, 2022 International Trade Settlement in Indian Rupe....
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....es (INR) Here"s a deeper look into SRVA: Purpose of SRVA: * Facilitating International Trade in INR: The SRVA enables foreign businesses or entities to carry out trade in INR rather than relying on traditional currencies like the US Dollar or Euro for transactions with Indian counterparts. This makes it easier for foreign businesses to trade with India while reducing their dependence on volatile foreign currencies. * Promoting the Indian Rupee: By allowing foreign entities to settle their transactions in INR, the SRVA helps promote the Indian Rupee as an international trade currency. This can lead to increased demand for the Rupee and can strengthen its position globally. * Enhancing Trade Relations: Countries facing foreign exchang....
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....e challenges or restrictions on currency convertibility can use SRVAs to settle payments for goods and services with Indian companies. This encourages bilateral trade with countries that may otherwise face difficulties engaging in traditional foreign exchange transactions. Mechanism: * Vostro Accounts: A Vostro account is a bank account held by one bank on behalf of another bank. For SRVAs, Indian banks maintain special Vostro accounts for foreign banks, where funds can be deposited and used for settlement in INR for trade transactions between Indian and foreign entities. * Currency Settlement: The foreign entity can deposit their local currency into the Vostro account maintained with an Indian bank. The Indian bank, in turn, uses thes....
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....e funds to settle payments in INR, facilitating trade between the two countries. * Payment and Receipt: Indian exporters or businesses receive payments in INR via the SRVA, which is a key benefit for both parties in the transaction. Importers or foreign traders can pay in their local currency, and the Indian counterpart receives INR without going through the normal forex exchange process. Benefits of SRVAs: * Reduction in Transaction Costs: SRVAs eliminate the need for foreign exchange conversions, which can result in lower transaction costs for international traders. * Currency Stability: SRVAs help mitigate the impact of currency volatility and provide more stability for both Indian and foreign businesses engaged in cross-border tr....
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....ade. * Increased Trade with Sanctioned Countries: Countries that may face sanctions or restrictions from using global currencies can use SRVAs to continue trade with India in INR, bypassing the traditional reliance on the US Dollar or other major currencies. * Increased Liquidity in INR: With more foreign entities trading in INR, there is increased liquidity in the Indian Rupee, which strengthens its position in international markets. Challenges: * Limited Use: While SRVAs help facilitate trade in INR, they are limited to transactions between countries and businesses willing to adopt INR for trade, meaning it may not be universally accepted. * Regulatory Compliance: Both Indian and foreign entities must comply with stringent RBI an....
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....d FEMA guidelines to ensure proper use of SRVAs. Non-compliance could lead to penalties or account closure. * Exchange Rate Risk: Although SRVAs reduce the dependency on traditional foreign currencies, they still expose the involved parties to potential exchange rate fluctuations in their own local currencies and the Indian Rupee. Conclusion: The Special Rupee Vostro Account (SRVA) is a key initiative aimed at increasing the global use of the Indian Rupee, enhancing trade relations, and offering an alternative to the dominance of traditional global currencies in international trade. It helps reduce currency conversion costs, encourages the use of INR, and supports smoother transactions between countries, especially those facing challeng....
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....es in foreign exchange management. While the SRVA has the potential to foster economic growth and enhance India"s global financial influence, it requires careful monitoring and compliance with regulatory guidelines to ensure its successful and secure implementation. *** Annexure - 1 RBI Press Release 2024-2025/1940 dtd. 16-01-2025 Steps to encourage use of Indian Rupee and local / national currencies for settlement of cross border transactions - Liberalization of FEMA regulations Steps to encourage use of Indian Rupee and local / national currencies for settlement of cross border transactions - Liberalization of FEMA regulations to encourage greater use of Indian Rupee (INR) for trade transactions, in July 2022, an additional arrangeme....
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....nt in the form of Special Rupee Vostro Account (SRVA) was introduced. Several foreign banks have since opened SRVAs with banks in India. The Reserve Bank has also signed Memorandum of Understanding (MoU) with the central banks of the United Arab Emirates, Indonesia and Maldives, to encourage cross-border transactions in local currencies. Further, in December 2023 the Foreign Exchange Management (Manner of Receipt and Payment) Regulations were revised to enable cross border transactions in all foreign currencies (including local currencies of trading partner countries) and INR. In order to promote cross border transactions in INR and local / national currencies, a further review of the existing regulations issued under FEMA, 1999 has been un....
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....dertaken by the Reserve Bank in consultation with the Central Government. Accordingly, the following changes have been made in the extant FEMA regulations: a. Overseas branches of Authorized Dealer banks will be able to open INR accounts for a person resident outside India for settlement of all permissible current account and capital account transactions with a person resident in India. b. Persons resident outside India will be able to settle bona fide transactions with other person's resident outside India using the balances in their repatriable INR accounts such as Special Non-resident Rupee account and SRVA. c. Persons resident outside India will be able to use their balances held in repatriable INR accounts for foreign investment, in....
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....cluding FDI, in non-debt instruments. d. Indian exporters will be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports. The revised Regulations1 and Directions to effect these changes have been issued. <br> Scholarly articles for knowledge sharing by authors, experts, professionals ....