In a move to accelerate the internationalisation of the Indian rupee and deepen bilateral trade in local currencies, the Reserve Bank of India (RBI) has urged the central government to lift the investment cap on Special Rupee Vostro Accounts (SRVAs). According to sources and official communication reviewed by Reuters, the RBI has recommended scrapping the current 30% limit on short-term investments from these accounts.
Vostro accounts, held by Indian banks on behalf of foreign counterparts, allow international trade partners to hold rupee balances for cross-border settlements. These balances can be used to invest in Indian government securities, including treasury bills. However, current regulations restrict only 30% of such funds to be used for securities with a maturity of less than one year—a constraint the RBI now views as a deterrent.
“The restriction was aimed at encouraging long-term flows, but it hampers short-term liquidity management—key to the operational flexibility of SRVA holders,” said one of the sources.
In its proposal to the finance ministry, the RBI argued that removing or relaxing the cap could enhance participation in rupee-based trade and attract more short-term investment via the SRVA route. As of December 2024, 156 SRVAs had been established through 123 correspondent banks from 30 countries, with total balances exceeding ₹134.55 billion ($1.60 billion).
The RBI’s broader efforts also include enabling overseas bank branches to open rupee accounts for global residents and allowing Indian exporters to maintain foreign currency accounts abroad. These steps are intended to promote a robust, internationally accepted rupee transaction ecosystem.