A viral message, exaggerating the extent to which the Indian rupee is being internationalised and being accepted abroad, is false. While the content of the message does draw on recent developments with respect to foreign countries opening a 'vostro' account to trade with India in the Indian rupee, several of its statements are conjecture or untrue.
The message attributed several statements to the New York Times to add credence to itself. However, BOOM did not find any article published by NYT stating that 30 countries had accepted the Indian Rupee.
Public data available with the Rajya Sabha shows 60 'vostro' accounts being opened by entities in 18 countries to facilitate trade in the India rupee. However, these accounts were first outlined by the Reserve Bank of India (RBI) in July 2022 to facilitate trade in the Indian rupee.
The message can be found below. BOOM recieved it on its helpline. (7700906988)
It is viral on social media.
To tap into growing interest in more trade in Indian rupees, the Reserve Bank of India introduced the concept of these special rupee vostro accounts last July. The immediate backdrop prompting this decision was twofold:
- To facilitate trade with Russia in rupees to bypass curbs on it to trade in dollars due to sanctions over its military actions in Ukraine
- To trade with Sri Lanka, which was and continues to face economic turmoil, and then lacked sufficient foreign exchange reserves.
These accounts facilitate 'correspondent banking': where an entity (in this case a bank in India) holds and operates an account on behalf of someone else (a foreign entity, normally a foreign bank). Vostro accounts will be operated by select banks in India but it can also be operated by a foreign bank through its Indian branch.
For a foreign entity to open such an account, it must first approach an authorised bank (authorised dealer bank or AD bank) in India. The AD bank must then present its case before the RBI and get its approval to open and operate such an account. All export and import invoicing between the two countries may be carried out in Indian rupees.
When an Indian exporter want to export to the country in question, the exporters can receive Indian rupees from the balance in these vostro accounts. Indian importers who wish to import from such countries may directly deposit Indian rupees into these accounts. The RBI also suggests that there are no restrictions on remitting the balances of these accounts, and that converting them into foreign currencies would be possible at market determined rates. Surplus balances in these accounts can be invested in government securities or payments for projects and investments.
1. How many countries are involved in trading using the Indian rupee?
The message obfuscates the total countries it is claiming will use the rupee to trade. It says 30 countries and later says 64 countries.
But data provided by the Ministry of Finance to Rajya Sabha shows that 60 such vostro accounts have been opened across 18 countries.
These 18 countries are: Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda and the United Kingdom.
While Israel and Germany are correctly mentioned by the claim, Italy is not. The reply can be found below (link here).
The claim also mentions Saudi Arabia accepting the rupee. While the kingdom has discussed rupee-riyal trade with India, there is no definitive arrangement from them on the same yet.
2. Is this a story by the New York Times?
BOOM could find no story by the New York Times where it recounts the number of countries with which India is or will potentially trade with in the Indian rupee.
However, the New York Times has covered India opening up foreign transaction settlements in Indian rupees.
This can be found here.
BOOM has reached out to the New York Times for a comment, and will update this story on hearing from them.
3. Has the DGFT released a circular?
Yes. The Directorate General of Foreign Trade has released a notification on trading in the Indian rupee, that the claim is correct on. The notification cites the RBI's move introducing the concept on vostro accounts.
The circular, however, does not provide any of the information the claim suggests.
The circular can be found here.
4. Will the rupee find a place in the IMF on reaching 50 countries?
The International Monetary Fund currently has a synthetic asset called Special Drawing Rights (SDR). This is not a currency in itself, but rather claims on a basket of currencies. Currently, the SDR is based on five currencies: the US dollar, the euro, the Japanese Yen, the British Pound and the Chinese Yuan. The weight each currency has, and the composition of the basket is decided every five years.
The yuan is the most recent entrant in the SDR, joining it in 2016.
There is no specific trading threshold as to the number of countries that must trade using a currency for it to enter the SDR.
In 2016, Peter Zollner, the Head of Banking at the Bank of International Settlements, outlined the criteria for a currency be eligible to enter the SDR:
- Currencies issued by member countries or monetary unions would have had the largest export value over five years.
- The currency needs to be freely tradable: using it widely to make international transactions and the currency being part of deep and developed foreign exchange markets which can be traded at any time around the clock without significant change in exchange rate.
This can be read here.
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