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| Combined photo of Tanzania and India's currencies. The Citizen |
Tanzania and India can minimize reliance on major global currencies and foster stable and efficient trading environment by promoting trade in local currencies, stakeholders have said.
The stakeholders gathered in Tanzania recently for a consultation meeting organized by the Indian Institute of Chartered Accountants.
They discussed the implications of the Rupee Nostro Account System, following the recent announcement of both countries to commence trading in their respective local currencies.
One of the key advantages highlighted during the discussion was the reduction in dependency on hard currencies.
Stakeholders were upbeat that the system would alleviate the need for constant currency conversions and reliance on foreign exchange reserves.
Managing director of Bank of India in Tanzania, Mr Antaryami Sarangi, said the system offers immense potential for business entities, which can effectively manage their forex balances and mitigate exchange risks associated with volatile global currencies.
"The banking sector also stands to gain from implementing this system. Banks could facilitate importers by providing them with increased flexibility and reduced dependencies on hard currencies.
"This would streamline trade processes and enhance the overall efficiency of cross-border transactions," he said.
Managing director of Bank of Baroda, Mr Aditya Narayan Singh, said the arrangement is likely to contribute to lower transaction costs, which would be beneficial to businesses of all sizes.
"By eliminating the need for constant currency conversions, settlement times can be significantly reduced and yield lower transaction costs," he said.
Indian Deputy High Commissioner, Mr Shri Manoj Verma, expressed optimism on the prospects for the Rupee Nostro Account System and its potential in deepening economic ties between Tanzania and India.
"It will encourage trade partners to buy more goods and services from each other, thus giving incentive to domestic industry and exporters and generating employment and income," he said.
Mr Verma said this could create an opportunity for local banks and businesses to enjoy payment transactions in domestic currencies.
In a press release posted on its website, the Indian High Commission in Dar es Salaam said the Reserve Bank of India (RBI) had cleared the way for trade using local currencies by allowing authorized banks in India to open Special Rupee Vestro Accounts (SRVA) in Tanzania.
To trade under this mechanism, Tanzanian banks will have to open SRVA in India by approaching authorized Indian banks that will, in turn, approach RBI for their approval with details of the arrangement, the statement further stated.
"Tanzania can conserve foreign exchange, and boost bilateral trade," he said.
India and Tanzania have bilateral trade currently valued at nearly $4.5 billion, during an interview with The Citizen Indian High Commissioner to Tanzania Binaya Pradhan revealed that at the end of 2023, the trade volume is expected to cross $6 billion. (The Citizen)
This article was originally published on The Citizen.
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