In an effort to boost shipments to countries like Russia the government is likely to allow exporters settling their trades in rupees to use export incentives and duty rebates under India’s foreign trade policy.
After receiving an approval from the Finance Ministry, the Directorate General of Foreign Trade (DGFT) may issue a clarification on this matter soon, reported Mint citing government officials.
Presently, if payment or export realizations come in freely convertible currencies including the dollar, British pound, euro and yen, only then incentives to exporters in the form of duty drawbacks, EPCG incentives, and rebates on duties and taxes under different government schemes ROSCTL and RODTEP are available.
With the clarification, the FTP will be suitably amended to enable exporters to claim export benefits for settling trade in rupees.
To facilitate trade in rupee it is reported that Russia’s Gazprombank has opened a special rupee account with state-owned UCO Bank.
Earlier in July the RBI introduced a rupee settlement system for international trade.
This involves invoicing, payment, and settlement of exports and imports to all countries, on the central bank’s approval, can be in Indian rupees.
To use this mechanism banks will need approval from the central bank.
Under this mechanism, exporters and importers can use a Special Vostro account linked to the correspondent bank of the partner country for receipts and payments denominated in rupees.