Strengthening Bilateral Trade in Local Currency
On August 5, 2025, the Reserve Bank of India (RBI) introduced the RBI SRVA Reform, a significant procedural change that removes the need for prior approval when Indian banks open Special Rupee Vostro Accounts (SRVAs) for foreign correspondent banks.
Trade and investment experts are calling the move a “game changer”, predicting it could fast-track non-oil trade between India and the UAE beyond the $100 billion target well ahead of the 2030 goal.
SRVA Reform Explained
Earlier:
Indian Category-I Authorised Dealer (AD) banks had to secure RBI’s explicit permission before opening an SRVA.
Now:
AD banks can directly establish SRVAs for foreign banks they already partner with—without the central bank’s prior clearance.
This is part of RBI’s broader plan to internationalise the Indian rupee and reduce dependence on the US dollar in global trade. An SRVA enables foreign banks to hold rupee balances and settle trade transactions with India.
Impact on India–UAE Economic Links
1. Boosting Non-Oil Trade Targets
Under their Comprehensive Economic Partnership Agreement (CEPA), India and the UAE aim to grow non-oil trade to $100 billion by 2030. The streamlined SRVA process could help achieve this years ahead of schedule.
2. Lower Transaction Costs and Faster Settlements
Local currency settlements eliminate multiple currency conversions and reduce associated costs. UAE-based Indian business leaders say this will speed up payments, improve efficiency, and strengthen trade channels.
Mohamed Haris, Chairman of Alhind Group, called it a strong step forward for cross-border commerce.
3. Added Financial Incentives
Just a day after the August 5 decision, the RBI allowed SRVA holders to invest their full rupee surplus in Indian central government securities (still subject to the 30% cap on short-term holdings). This offers better yield options for foreign banks maintaining rupee accounts in India.
4. Building on Previous Milestones
The reform builds on earlier steps, including:
- A 2023 rupee–dirham settlement memorandum
- Pilot oil trade settlements in rupees
- Linking of India’s UPI with the UAE’s Integrated Payment Platform (IPP)
Context: RBI’s Wider Push for Rupee Globalisation
The August 5 reform is part of a series of moves to make rupee-based transactions more attractive globally:
- Jan 2025: FEMA rules relaxed to let overseas AD bank branches open rupee accounts for non-residents.
- Apr–May 2025: RBI considered lifting SRVA fund investment limits in short-term government securities.
- Aug 12, 2025: RBI SRVA Reform granted full investment freedom for SRVA surpluses in sovereign debt instruments.
Remittance Policy Review:
With $30 billion outbound remittances in FY 2024–25, the RBI SRVA Reform is reassessing its Liberalised Remittance Scheme to further promote rupee use abroad.
What This Means Going Forward
Key developments to watch:
- Greater SRVA adoption by UAE banks and corporates.
- Growth in non-oil trade volumes, likely exceeding $100 billion before 2030.
- Enhanced rupee liquidity and more investment channels, particularly in sovereign securities.
- Wider adoption of digital payment tools like UPI and RuPay for retail and remittance services in the UAE.
- Replication of the SRVA model with other trade partners aiming to reduce dollar reliance.
A Policy with Global Trade Impact
By eliminating the prior-approval step for SRVAs, the RBI SRVA Reform has taken a decisive step toward positioning the rupee as a competitive settlement currency in world trade. The reform is expected to make India–UAE cross-border business faster, cheaper, and more profitable, turning an ambitious trade goal into a near-term achievement.
