UCO Bank becomes first lender to get RBI’s approval for rupee trade

UCO Bank becomes the first lender to get RBI’s approval for rupee trade: The Reserve Bank of India (RBI) has given public sector lender UCO Bank permission to open a special Vostro account with Russian bank Gazprombank for the settlement of trade in Indian rupees. Following the RBI’s decision in July to allow Indian banks to settle in Indian currency, the Kolkata-based lender became the first to get regulatory approval.

RBI’s approval for rupee trade: Key Points

• The largest gas producer and exporter in the world, Gazprom, established the Russian lender in 1990 to offer financial services to businesses in the gas industry. One of the top three banks in Russia, Gazprombank provides over 45,000 corporate and three million private clients with a wide variety of banking and investing services.
• They have issued a circular addressing the unique Vostro account. It will function in circumstances where the country’s trade balance is neutral. The RBI has established a good structure in which a certain amount of trading can take place in rupees.
• India’s trade with Russia has increased since the Russian invasion of Ukraine. India’s imports from Russia totaled $9.27 billion in the April-June quarter, jumping 369 percent year on year.
• Crude oil accounted for about two-thirds of the country’s imports. Other significant imports from the country were coal, soybean and sunflower crude oil, and fertilizers, among other things.
• On July 11, the RBI released a circular allowing commercial settlements in rupees between India and other nations such as Sri Lanka and Russia.

Vostro account

• A Vostro account is an account a correspondent bank holds on behalf of another bank. A Vostro account is an essential part of correspondent banking in which a foreign bank works as an agent for a domestic bank, delivering financial services on its behalf.
• Vostro accounts enable domestic banks to offer international financial services to their clients who require them.
• Vostro account services include wire transfers, foreign exchange transactions, deposit and withdrawal options, and international trade streamlining.

UCO Bank

• UCO Bank, formerly United Commercial Bank, is an Indian nationalized bank. It is owned by the Ministry of Finance, Government of India.
• After the United States reinforced the initial sanctions, the Union government chose UCO Bank as the payment bank for oil imports from Iran in 2012.
• UCO Bank was chosen due to its small global footprint, which made it less susceptible to consequences from its interactions with Iran, which was then under sanctions.
• The motto of UCO Bank is “Honours your Trust”
• Headquarters: Kolkata
• CEO: Shri Soma Sankara Prasad
• Founded: 6 January 1943
• Founder: Ghanshyam Das Birla