The proposal is a part of the government’s bigger plan to internationalise the Indian currency, people aware of details told ET. The system will help settle bilateral trade in rupees.
An expert committee of bankers is exploring options and is expected to submit findings to the government by August, according to officials aware of the matter. The committee members are drawn from the State Bank of India, Bank of Baroda, Bank of India and Central Bank of India among others.
“One of the suggestions was to have an independent financing messaging system that can be used with countries where we have bilateral trade agreements,” said a bank official who did not wish to be identified. “This committee will now suggest measures on how to make this operational and what are the challenges. Accordingly, the issue will be taken up with other stakeholders, including the Reserve Bank of India (RBI).”
Another official said the committee will look at the RBI’s existing platform, the Structured Financial Messaging System, or SFMS.
Indian financial network
“We have to explore how we can scale this up,” he said.Built on the lines of SWIFT, the SFMS can be used for secure communications within and between banks. In its 2022 Vision Document, the RBI also made a case for expanding the ambit of the SFMS.
“The feasibility of providing membership/technology of Infinet to other jurisdictions shall be explored,” it noted. “Further, it shall be explored to expand the framework of SFMS to provide a domestic payment system platform to other jurisdictions. This could be expected to provide faster, convenient, and cost-effective direct payment channels with other jurisdictions.”
The Indian Financial Network (Infinet) is a membership-only Closed User Group network that comprises the RBI, CPS (Centralised Payment System) member banks and financial institutions. It provides financial messaging services through its member interface application to all RTGS (Real Time Gross Settlement) participants.
The government has been pushing banks to conduct outreach programmes with the international trading community to promote trade using special rupee vostro accounts (SRVAs).
So far, 20 banks from 22 countries have opened 92 such accounts, including Bangladesh, Germany and Russia.
The RBI and the Central Bank of UAE earlier this month signed an agreement that will enable exporters and importers to invoice and pay in their respective domestic currencies, enabling the development of a bilateral foreign exchange market.