The Reserve Bank of India (RBI) has authorised India and Tanzania to settle bilateral trade in their respective national currencies. It is anticipated that using national currencies in bilateral trade agreements will lower transaction costs and increase the effectiveness of international trade. In turn, this will result in stronger economic collaboration and trade between Tanzania and India.
Binaya Pradhan, the Indian High Commissioner to Tanzania, is optimistic that the decision will be advantageous to the business community.
He wrote in a tweet, ‘Excellent news for India-Tanzania commerce; rupee and Tanzanian shilling (tsh) can now be used for settlement of bilateral trade; business community from both sides should make best use of it.’
Under this mechanism, authorised banks in India will open Special Rupee Vostro Accounts (SRVAs) of correspondent banks of Tanzania.
Tanzanian banks will have to open Special Rupee Vostro Accounts in India by approaching authorised Indian banks, who will in turn approach RBI for their approval with details of the arrangement.
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