India and Tanzania have received approval from the Reserve Bank of India (RBI) to utilize their respective national currencies for settling bilateral trade. By employing their own currencies, the countries can expect a reduction in transaction costs, an improvement in cross-border trade efficiency, and an increase in trade volume, resulting in greater economic collaboration.
Binaya Pradhan, the Indian High Commissioner to Tanzania, has shared his positive outlook on the impact of the currency agreement on the business community. In a tweet, he expressed that the Reserve Bank of India's approval of using the Indian Rupee and Tanzanian Shilling for bilateral trade settlement is excellent news for India-Tanzania trade. He also encouraged the business communities from both nations to utilize this mechanism to its fullest potential.
Authorized banks in India and Tanzania will open Special Rupee Vostro Accounts (SRVAs) for bilateral trade settlement, following approval from the Reserve Bank of India. Bank of Baroda has received approval to establish SRVAs in 18 countries, including Tanzania. Under the agreement, Indian importers will pay INR, which will be deposited into the correspondent bank's designated Special Vostro account. Indian exporters can receive payment for their export proceeds in INR from the correspondent bank's account. The Indian High Commission in Tanzania will hold a Stakeholders Consultation Meeting on March 24, 2023, to discuss the mechanism's specifics and advantages, which align with RBI's objective of promoting domestic currency use in cross-border transactions.
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