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BUSINESS EYE DECEMBER 23, 2022 | The Indian Eye 34

Rupee gains strength as India trades

with big partners in national currency

India’s forex reserves rose by $2.908 billion to $564.06 billion for the week ended on December 9,
according to the Reserve Bank data released on Friday

OUR BUREAU
New Delhi/Mumbai
ndia’s rupee trade settlement
mechanism, a means of using ru-
Ipees instead of dollars and other
big currencies for international trans-
actions, is attracting interest from
more countries. Tajikistan, Cuba,
Luxembourg and Sudan have be-
gun talking to India about using the
mechanism, according to two sources
and an official document reviewed
by Reuters. It has already been used
by Russia following the imposition
of sanctions on Moscow over the
Ukraine war.
The Reserve Bank of India (RBI)
set up the mechanism in July.
The government is looking to
bring countries that are short of
dollars into the mechanism, said a
government official and an industry
source aware of the development.
The sources declined to be named, as
the matter is confidential.
The four countries have shown India continues to discuss denomination of trade in rupees with larger trading partners, including key oil suppliers
interest in opening special rupee ac-
counts, called vostro accounts, but Saudi Arabia and United Arab Emirates (File photo)
partner banks in India have not yet
provided those facilities, documents Saudi Arabia on a rupee-riyal trade foreign exchange kitty had reached an fallen by 1,340.1 points or 2.13 per
showed. Opening of these accounts mechanism also continue, the govern- all-time high of $645 billion. The re- cent.
needs approval from the Reserve ment official added. serves had been declining as the cen- Amid the weak trend in equities,
Bank of India. The UAE and Saudi Arabia are tral bank deployed the reserved to de- the market capitalization of BSE-list-
Mauritius and Sri Lanka have talking through ways to invest Indi- fend the rupee amid pressures caused ed firms eroded by Rs 5,78,648.39
also shown interest, and have seen an rupees they earn as part of these majorly by global developments. crore to Rs 2,85,46,359.06 crore in
their special vostro accounts approved transactions, as the gulf nation’s ex- Foreign currency assets (FCA), two days.
by the RBI, documents showed. ports to India exceed imports from it. a major component of the overall re- “Global markets extended their
India’s central bank has given ap- “We have presented the option of serves, increased by $3.141 billion to rout as the European Central Bank
proval to banks to open 12 vostro for investing additional rupees in Indian $500.125 billion during the week to (ECB) and Bank of England (BoE)
trade in rupees with Russia, according markets,” the official said. December 9, according to the Week- followed the Fed in raising policy
to the document. Six other accounts, As part of the rules issued earlier ly Statistical Supplement released by rates by half a per cent while main-
including five for trade with Sri Lanka this year, the Indian central bank has the RBI. taining a hawkish tone on inflation.
and one for trade with Mauritius have allowed for any rupee holdings to be But in a negative development, The aggressiveness of central
been authorized, the same document invested in government securities. investors wealth tumbled over Rs 5.78 banks in combating inflation has
showed. Meanwhile, India’s forex reserves lakh crore in two days of market fall raised concerns about the global
India continues to discuss de- rose by $2.908 billion to $564.06 bil- amid a weak trend in global markets economy’s health,” said Vinod Nair,
nomination of trade in rupees with lion for the week ended on December after a host of central banks hiked head of research at Geojit Financial
larger trading partners, including key 9, according to the Reserve Bank data interest rates and gave hawkish com- Services.
oil suppliers Saudi Arabia and United released on Friday. mentary. The 30-share Sensex de- Mohit Nigam, fund manager &
Arab Emirates. In the previous reporting week, clined 461.22 points or 0.75 per cent head at Hem Securities, said Indi-
Details of potential rupee-dirham the overall reserves had soared by $11 to settle at 61,337.81 on Friday. In the an shares opened lower on Friday,
trade mechanism are being firmed billion to $561.16 billion. This is the previous trade, the BSE benchmark dragged by losses across sectors, on
up by the central banks of India and fifth consecutive week of an increase had tanked 878.88 points or 1.40 per recession fears in the US and hawkish
UAE, a second government official in the reserves. cent to settle at 61,799.03. commentary by major central banks,
said, requesting anonymity. Talks with In October 2021, the country’s In two days, the benchmark has following their US counterpart.

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