Why trade settlement in rupee is off to a tentative start

Source: livemint.com livemint.com

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Some 20 banks have opened special vostro accounts to settle foreign trade in rupees. However, the mechanism is yet to take off with exporters flagging issues. Russian buyers, meanwhile, are offering payments to Indian exporters in yuan and dirham. Mint explains: Why was the mechanism needed? In the backdrop of the Ukraine war and Western sanctions against Russia, the Reserve Bank of India launched the rupee settlement mechanism in July to buy cheap Russian oil, cut its dependence on foreign currencies and reduce India’s vulnerability to external shocks. But efforts to promote trade in rupees have been fraught with challenges....