The Reserve Bank of India (RBI) has announced a new update under circular RBI/2025-26/91 A.P. (DIR Series) Circular No. 14, dated October 3, 2025, that aims to strengthen international trade settlements in Indian Rupees (INR).
The new RBI Vostro Account Investment 2025 rule allows Authorised Dealer (AD) Category-I banks to permit investments of surplus balances from Special Rupee Vostro Accounts in non-convertible debentures (NCDs), bonds, and commercial papers (CPs) issued by Indian companies.
This circular takes effect immediately and is a significant move in India’s ongoing mission to make the Indian Rupee a global trade currency.
What Is a Special Rupee Vostro Account?
A Special Rupee Vostro Account (SRVA) is an account maintained by an Indian bank for a foreign bank or financial institution to facilitate trade in Indian Rupees instead of foreign currencies like USD or EUR.
This system allows foreign traders to pay and receive money in INR for transactions involving Indian exports and imports.
The RBI introduced SRVAs in July 2022 to promote Rupee-based international trade. It enables countries to trade with India directly in INR, reducing reliance on foreign currencies and supporting the vision of a self-reliant India (Atmanirbhar Bharat).
Background: Previous Rules
Earlier, as per RBI Circular No. 10 dated July 11, 2022, balances held in Special Rupee Vostro Accounts could be used for limited purposes such as:
- Settling import and export payments in INR
- Investment in Government Treasury Bills
- Investment in Government Securities, within the limits defined by RBI
Private or corporate investments were not allowed until now.
New RBI Update (October 2025 Circular)
With the latest Circular No. 14, the RBI has expanded how the funds in SRVAs can be used.
Now, AD Category-I banks can allow the use of surplus balances in these accounts to invest in:
- Non-Convertible Debentures (NCDs)
- Bonds
- Commercial Papers (CPs)
These must be issued by Indian companies, and the investment should comply with the guidelines and limits issued under AP DIR Circular No. 13 (October 3, 2025).
In simple words, foreign entities holding rupee balances in India can now invest their unused funds in Indian corporate debt instruments, generating returns and boosting India’s financial markets.
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Legal Framework
The RBI issued this direction under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999.
These sections empower the RBI to regulate foreign exchange transactions and guide authorised banks on how to manage such funds.
The circular also clarifies that banks and investors must still follow other applicable laws and approvals under Indian regulations.
Effective Immediately
This circular is effective immediately.
All Authorised Dealer Category-I banks must inform their clients and foreign partners about these updated investment permissions without delay.
Why This Move Is Important
The RBI’s step to widen investment options for Special Rupee Vostro Accounts carries several key benefits for India’s economy and global trade ambitions.
1. Strengthens the Indian Rupee
When foreign banks and companies hold and invest in INR, the global demand for the Indian Rupee increases. This helps India in promoting the rupee as a credible currency for international trade.
2. Encourages Foreign Capital Inflows
Instead of keeping balances idle, foreign banks can now invest in Indian corporate instruments. This brings additional capital inflows into India’s financial markets.
3. Supports Indian Businesses
Indian companies issuing bonds or commercial papers get access to more investors and can raise funds more efficiently for business growth and infrastructure projects.
4. Deepens India’s Debt Market
Allowing more investors into India’s debt market creates a broader and more liquid bond market, improving financial stability and efficiency.
5. Boosts INR-Based Trade Settlements
This move encourages more countries to settle trade transactions in Indian Rupees, aligning with India’s goal of reducing dollar dependency and strengthening economic sovereignty.
Practical Example
Suppose a bank from Russia or the UAE holds a Special Rupee Vostro Account with an Indian bank after trade settlements.
Earlier, that money could only be used for paying Indian exporters or investing in government securities.
Now, under this new rule, the same bank can also invest in corporate bonds or commercial papers issued by Indian firms like Reliance, NTPC, or Infosys—within RBI-approved limits.
This creates a win-win situation:
- Indian companies get access to more capital.
- Foreign holders earn returns on their INR balances.
- The rupee gains wider international acceptance.
How It Fits into India’s Global Trade Vision
The RBI’s decision is a key step toward internationalizing the Indian Rupee.
By expanding investment options for rupee balances, India is making it more convenient and attractive for foreign partners to settle trade in INR. Over time, this can lead to:
- Reduced dependency on the U.S. dollar,
- More stable foreign exchange reserves,
- Lower transaction costs for trade, and
- Greater confidence in the rupee as a trade currency.
Key Takeaways
| Aspect | Details |
| Circular Number | RBI/2025-26/91 A.P. (DIR Series) Circular No. 14 |
| Date | October 3, 2025 |
| Applies To | All Authorised Dealer Category-I Banks |
| New Rule | Surplus SRVA balances can be invested in NCDs, bonds, and CPs issued by Indian companies |
| Legal Basis | Sections 10(4) and 11(1) of FEMA, 1999 |
| Effective From | Immediate |
| Purpose | To strengthen INR-based trade and promote Rupee internationalization |
Conclusion
The RBI’s October 2025 circular marks another important milestone in India’s efforts to make the Indian Rupee a global trade currency.
By allowing investments of Special Rupee Vostro Account balances into corporate bonds and commercial papers, the RBI is unlocking new opportunities for both foreign investors and Indian companies.
This move strengthens India’s debt market, supports economic growth, and builds global trust in the Rupee as a reliable trade and investment currency.
India’s financial ecosystem is steadily evolving—and this RBI step is a major leap forward toward “Global Trade in Indian Rupees.”