New Delhi [India], August 13 : The Reserve Bank of India (RBI) has permitted persons resident outside India holding Special Rupee Vostro Accounts (SRVAs) to invest their surplus rupee balances in central government securities, including treasury bills.
The RBI has also updated its Master Direction on Non-resident Investment in Debt Instruments to incorporate the operational guidelines for this measure.
SRVAs are special accounts maintained by foreign banks with Indian banks to facilitate the settlement of international trade transactions in Indian rupees, as part of India's push to promote the rupee as an international trade settlement currency. The mechanism was first introduced in July 2022, allowing trade settlements in INR with partner countries.
According to the RBI's latest guidelines, foreign entities holding such accounts will now be able to channel their unused rupee funds from trade settlements into investments in central government securities, including short-term instruments such as treasury bills.
The RBI stated, "Persons resident outside India that maintain a Special Rupee Vostro Account (SRVA) for international trade settlement in Indian Rupees in terms of A.P. (DIR Series) Circular No. 10 dated July 11, 2022 may invest their rupee surplus balance in the aforesaid account in Central Government Securities"
The directions, issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999, have come into immediate effect. Authorised Dealer Category-I (AD Cat-I) banks have been asked to inform their constituents and concerned customers about the new provisions.
Given the sovereign guarantee, central government securities are considered as one of the safest investment options in India. With this move, non-resident holders of SRVAs will have the flexibility to invest surplus trade settlement funds in risk-free instruments, earning good returns along with supporting India's government borrowing programme.
The updated Master Direction, Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025, issued on January 7, 2025, has been revised to incorporate these new guidelines.
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