By Rhod Mackenzie
India is discussing the possibility of creating its own international financial messaging system modeled on the SWIFT system for rupee settlements in its international trade, the Economic Times reported, citing sources.
An expert committee of bankers is studying all options and will present the results to the government by August, sources said. The committee includes, inter alia, the State Bank of India, the Baroda Bank, the Bank of India and the Central Bank of India.
“One of the proposals was to create an independent financial messaging system that could be used with countries where we have bilateral trade agreements. Now this committee will propose measures to ensure that this works, and what could be the problems Accordingly, this issue will be considered with other interested parties, including the Reserve Bank of India (Central Bank of India)," the source said.
The proposal is part of a larger government plan to internationalize the Indian currency, banking officials said.
The Government of India in November 2021 allowed the use of the national currency in international trade settlements to promote exports as part of its new foreign trade policy. As noted by the Ministry of Commerce, these amendments were adopted to simplify and facilitate international trading in Indian rupees, given the growing interest in the internationalization of the Indian national currency.
Last year, India's central bank issued a circular on trade settlements between India and other countries in rupees. Thus, Indian importers must make payment in Indian rupees, which will be credited to a special correspondent bank account of the partner country's correspondent bank on invoices for the supply of goods or services from a foreign supplier. And for Indian exporters, the proceeds will be paid in Indian rupees from the balances on a special correspondent account of the partner country's correspondent bank.
To date, 92 such accounts have been opened in India by 20 banks from 22 countries, including Bangladesh, Germany and Russia.