BOC opens Vostro account with SBI

Indian High Commissioner Gopal Baglay (right) with State Bank of India South Asia Regional Head Vikas Goel

Bank of Ceylon (BoC) Chennai Branch has opened a Vostro account with the State Bank of India to carry out bilateral trade in Indian Rupees.

Daily FT learns that several other commercial banks are currently negotiating with leading corresponding banks in India for similar arrangements.

Indian High Commissioner Gopal Baglay announced the new development without naming the Sri Lankan bank.

“Happy to note that a Sri Lankan bank has opened a vostro account in India with State Bank of India to conduct bilateral trade in INR. The High Commissioner discussed this & related matters with South Asia Regional Head of SBI Mr. Vikas Goel,” tweeted Baglay yesterday.

India is the biggest source for Sri Lanka’s imports.

Sri Lanka’s exports to India increased by 13.24% YoY to $ 642.03 million in the first nine months of 2022. Growth in Exports to India was mainly supported by increased exports of animal feed (14.69%), areca nuts (69.85%), woven fabrics (77.45%), and wood pulp (33.85%) %) from January – September 2022.

A vostro account is an account a correspondent bank holds on behalf of another bank. These accounts are an essential aspect of correspondent banking in which the bank holding the funds acts as custodian for or manages the account of a foreign counterpart.

Sri Lanka has agreed to use Indian rupee (INR) for international trade. It comes days after the Government of India said it is looking at ways to bring countries that are particularly short of dollars into the ambit of Indian rupee trade settlement mechanism.