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RBI Issues Consolidated Circular on International Trade Settlement in Indian Rupees: Key Changes for Cross-Border Transactions

  • Writer: Kaustav Chowdhury
    Kaustav Chowdhury
  • 1 day ago
  • 6 min read

The Reserve Bank of India (RBI) has issued a consolidated circular on Special Rupee Vostro Accounts (SRVAs), rationalizing instructions from five earlier circulars issued between July 2022 and October 2025. This consolidated directive streamlines the regulatory framework for international trade settlement in Indian Rupees (INR), providing authorized dealer (AD) banks and their overseas counterparts with a single reference point for SRVA operations and cross-border trade settlement.

This article examines the key provisions of the consolidated circular, the evolution of the INR trade settlement framework, and what these changes mean for banks and businesses engaged in cross-border trade.


Background: The INR Trade Settlement Framework

The framework for international trade settlement in INR was first introduced through A.P. (DIR Series) Circular No. 10, dated July 11, 2022. That foundational circular allowed invoicing, payment, and settlement of exports and imports in Indian Rupees through SRVAs, creating an additional mechanism alongside the conventional foreign currency-based settlement system. Under the framework, Category-I AD banks were authorized to open SRVAs for correspondent banks of partner trading countries, with the exchange rate between the currencies of the two trading partners to be market-determined.

Since its introduction, the framework has undergone several amendments to widen its scope and simplify its procedures. These amendments were spread across multiple circulars issued at different points in time, creating a fragmented regulatory landscape for participants. The consolidated circular addresses this fragmentation by bringing all instructions under a single directive. Entities involved in cross-border trade should also review the broader regulatory landscape, including the FEMA Authorised Persons Regulations, which govern the categories of banks permitted to handle foreign exchange transactions.


The Five Superseded Circulars

The consolidated circular supersedes five prior directives that had, over a period of three years, progressively expanded and liberalized the INR trade settlement framework:

  • A.P. (DIR Series) Circular No. 10, dated July 11, 2022: The original circular establishing the INR trade settlement framework and the SRVA mechanism.

  • A.P. (DIR Series) Circular No. 08, dated November 17, 2023: Amendments to the original framework addressing operational aspects of SRVA management.

  • A.P. (DIR Series) Circular No. 11, dated June 11, 2024: Further refinements to SRVA operations and trade settlement procedures.

  • A.P. (DIR Series) Circular No. 08, dated August 5, 2025: A significant liberalization that removed the requirement for prior RBI approval to open SRVAs, enabling AD banks to open accounts directly for overseas correspondent banks.

  • A.P. (DIR Series) Circular No. 13, dated October 3, 2025: Permitted SRVA holders to invest surplus rupee balances in non-convertible debentures (NCDs), bonds, and commercial papers (CPs) issued by Indian companies.

By superseding these five circulars, the RBI has created a single consolidated reference that captures all previous liberalizations and amendments, reducing regulatory complexity for all stakeholders.


Key Provisions of the Consolidated Circular

The consolidated circular covers several important areas that AD banks and their overseas counterparts must be familiar with.

Account Opening

Category-I AD banks in India may open SRVAs for their branches outside India or for banks resident outside India, under Regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016. Prior RBI approval is no longer required for opening SRVAs, a liberalization first introduced in August 2025 and now incorporated into the consolidated framework. Entities looking to understand how overseas branches interact with the Indian regulatory framework may refer to guidance on registering a branch office or liaison office under FEMA.

Funding of SRVAs

SRVAs may be funded through inward remittances or transfers from other repatriable INR accounts under the Foreign Exchange Management (Deposit) Regulations, 2016. The proceeds accrued through permissible current and capital account transactions under the Foreign Exchange Management Act (FEMA) can also be held in the SRVA. Balances in the SRVA are freely repatriable, providing flexibility for overseas account holders.

Scope of Transactions

The settlement of cross-border trade transactions through SRVAs remains an additional arrangement for invoicing, payment, and settlement of exports and imports in INR. All permissible current and capital account transactions under FEMA may be settled through the SRVA, making this mechanism available not just for trade but for a broader range of cross-border financial flows.

Investment of Surplus Balances

Investments in debt instruments out of SRVA balances are governed by the Master Direction on Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025. This includes investment in central government securities, treasury bills under both the Fully Accessible Route (FAR) and the General Route, as well as non-convertible debentures, bonds, and commercial papers issued by Indian companies. Corporate debt investments are reckoned under the limits applicable to Foreign Portfolio Investors (FPIs), and income from such investments is also repatriable. For a broader understanding of inbound investment rules, businesses may review the FEMA foreign investment rules and compliance requirements.

Additional Current Accounts and FEDAI Directory Reporting

AD banks maintaining SRVAs are permitted to open additional current accounts for exporters and importers, exclusively for the settlement of export and import transactions. This facility was originally limited to export transactions but has been expanded to cover imports as well. The details of SRVAs held by overseas correspondent banks must be updated periodically in the SRVA directory published by the Foreign Exchange Dealers' Association of India (FEDAI), which is publicly accessible on the FEDAI website.



Connection to the FEMA EXIM Regulations 2026

The consolidated SRVA circular should be read alongside the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, notified vide Notification No. FEMA 23(R)/2026-RB dated January 13, 2026. These EXIM Guidelines, effective October 1, 2026, complement the INR trade settlement framework by consolidating India's cross-border trade rules for goods, services, and software under a unified structure with revised norms for payments, documentation, and reporting.

Of particular relevance is the extended realization period for exports invoiced and settled in INR, which has been set at 18 months from the date of shipment for goods and the date of invoice for services. This is longer than the standard 15-month period applicable to exports settled in foreign currency, reflecting the RBI's intent to incentivize INR-denominated trade. Additionally, the earlier six-month timeline for import payments has been removed, with payment timelines now aligned to agreed contractual terms. For related regulatory developments in the FEMA space, stakeholders may also wish to review the FEMA Guarantees Regulations 2026.


Growing SRVA Network Across Partner Countries

Since the framework was first introduced in 2022, the RBI has facilitated the opening of SRVAs for banks from a growing list of partner countries. Banks from countries including Bangladesh, Belarus, Botswana, Fiji, Germany, Guyana, Israel, Kazakhstan, Kenya, the Maldives, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda, and the United Kingdom have been permitted to open SRVAs with Indian AD banks.

As of early 2026, the SRVA network has expanded to over 80 accounts across more than 30 trading partner countries, signaling growing international interest in INR-denominated trade settlement. The removal of the prior approval requirement has further accelerated this expansion, making it significantly easier for overseas banks to participate in the framework. India's broader push toward the internationalization of the rupee has also gained momentum through bilateral agreements, including the Memorandum of Cooperation discussed at the India-Japan Annual Summit in July 2026 for direct trade settlement in national currencies.


Compliance Considerations for Authorized Dealer Banks

AD banks operating SRVAs must ensure compliance with the following requirements under the consolidated circular:

  • Know Your Customer (KYC) and Anti-Money Laundering (AML) norms must be applied to all SRVA operations, consistent with the bank's existing compliance framework.

  • All transactions involving the SRVA of the correspondent bank of the trading partner country must be duly reported by the AD bank in India.

  • The exchange rate between the currencies of the two trading partner countries is to be market-determined.

  • AD banks must update SRVA details periodically in the FEDAI directory to maintain transparency and facilitate trade.

  • Investments from SRVA balances must comply with the prescribed limits and directions under the Master Direction on Non-resident Investment in Debt Instruments, including demat account requirements for corporate debt investments.

  • AD banks must facilitate the opening of separate demat accounts for SRVA holders, and all transactions must be reported to SEBI-registered depositories.

For businesses engaged in cross-border trade, the consolidated framework offers a clearer regulatory pathway for settling transactions in INR. Companies should work with their AD banks to understand how the SRVA mechanism can be leveraged for their specific trade corridors. Understanding the broader FEMA compliance landscape, including the RBI's regulatory framework for financial institutions, remains essential for entities involved in international trade and investment.



Conclusion

The RBI's consolidated circular on Special Rupee Vostro Accounts represents a significant step in promoting the internationalization of the Indian Rupee. By bringing five separate circulars under one directive, the RBI has reduced regulatory complexity and provided a unified framework for AD banks and their overseas counterparts. Combined with the forthcoming FEMA EXIM Regulations 2026 and the SRVA network spanning more than 30 partner countries, the INR trade settlement mechanism is increasingly positioned as a viable option for cross-border trade.

Authorized dealer banks and businesses engaged in international trade should review the consolidated circular carefully and ensure their systems and compliance frameworks are aligned with its requirements. As more countries join the SRVA network, early adoption of the INR settlement mechanism may offer strategic advantages in terms of reduced currency risk and lower exchange rate costs.

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