Indian exporters reluctant to settle in INR
With the depreciation of the Sri Lankan rupee during the peak of the economic crisis, trade settlements between India and Sri Lanka were discussed among the two governments to set off imports from India in Indian rupees (INR).
Exporters from India now fear that the INR would depreciate against the US dollar and so that they print all invoices in US dollars, Bank of Ceylon, Deputy General Manager for International Treasury and Investments, R.M.N. Jeevantha told the Business Times on the sidelines of an event organised in Colombo by the Ceylon Chamber of Commerce.
Mr. Jeevantha said, “Majority of the Indian exporters are very reluctant to print invoices in INR as they are worried the INR would depreciate against the US dollar. In India there is a requirement that all exporters convert the US dollars into INR within a span of time. While we are encouraging the local importers to obtain the invoices in INR for trade settlements, we are also hopeful that Indian exporters would do the same in the future.”
Currently there are six local banks that provide importers from India with Nostro accounts so that LKR is converted directly into INR without the conversion into US dollars. Bank of Ceylon is the first to introduce the account for trade settlements between India and Sri Lanka, he added.
During the discussion on ‘Indian rupee denominated trade settlements between India and Sri Lanka and the impact to importers’ at the Ceylon Chamber of Commerce on Wednesday, Central Bank Senior Economist, W.G.R. Wathugala stated that both India and Sri Lanka could benefit through the INR trade settlement scheme.
INR has competitive advantages; 24/7 settlement system, same time zone and immediate funding while there is minimal cost for interbank settlement; covers mostly all trading regions, he added.
He also highlighted the INR trade settlement benefits to the traders. “It will reduce the exchange rate risk associated with currency volatility. Pricing will be easy and ability to quote best prices. Cost related to settlements will be an insignificant amount. There won’t be any settlement delays. New and small level traders will get the opportunity to trade globally. Tourism will be stress-free and attractive,” noted Mr. Wathugala.