Sri Lankan bank has opened a vostro account in India with State Bank of India to conduct bilateral trade in Indian rupee, Indian High Commission in Sri Lanka said.
The High Commissioner discussed this and related matters with South Asia Regional Head of State Bank of India (SBI) Mr. Vikas Goel today, the Indian High Commission in Sri Lanka tweeted.
Bank of Ceylon (BoC) Chennai Branch has opened a Vostro account with the State Bank of India to carry out bilateral trade in Indian Rupees, official sources revealed.
Several other commercial banks are currently negotiating with leading corresponding banks in India for similar arrangements.
Indian High Commissioner Gopal Baglay announced the new development without naming the Sri Lankan bank.
“Happy to note that a Sri Lankan bank has opened a vostro account in India with State Bank of India to conduct bilateral trade in INR.
The High Commissioner discussed this and related matters with South Asia Regional Head of SBI. Vikas Goel,” tweeted Baglay yesterday.
The Indian government has opened five special vostro accounts for trade in rupee with Sri Lankan banks with a view of facilitating trade with the island nation, official sources said
SBI Mauritius Ltd and People’s Bank of Sri Lanka opened an SVRA with State Bank of India (SBI). In addition, Bank of Ceylon opened an account in its Indian subsidiary in Chennai recently.
Union Bank of India has opened spec opened special rupee account of Ros Bank Russia while Chennai-based Indian Bank has opened such accounts of three Sri Lankan banks, including Colombo-based NDB Bank and Seylan Bank
These special vostro rupee accounts (SVRA) with banks of Sri Lanka rationalizing the rupee trade arrangement.
Under the rules, any surplus in these rupee accounts can be invested in treasury bills and government securities. Banks want to understand how these securities will be transferred to the buyers.
Under the arrangement announced by the RBI on July 11, an authorized bank in India can open special rupee vostro accounts of correspondent banks of any partner trading country.
India is the biggest source for Sri Lanka’s imports. Sri Lanka’s exports to India increased by 13.24% YoY to $ 642.03 million in the first nine months of 2022.
Growth in Exports to India was mainly supported by increased exports of animal feed (14.69%), areca nuts (69.85%), woven fabrics (77.45%), and wood pulp (33.85%) %) from January – September 2022.
A vostro account is an account a correspondent bank holds on behalf of another bank. These accounts are an essential aspect of correspondent banking in which the bank holding the funds acts as custodian for or manages the account of a foreign counterpart.
Sri Lanka has agreed to use Indian rupee (INR) for international trade. It comes days after the Government of India said it is looking at ways to bring countries that are particularly short of dollars into the ambit of Indian rupee trade settlement mechanism.
