DFDL Myanmar Alert: Myanmar-India Border Trade Rupee Vostro Account Guidelines

As of 25 January 2024, the Central Bank of Myanmar (“CBM“) under the State Administration Council (“SAC“) issued detailed guidelines for a new payment mechanism for India-Myanmar border trade (“Guidelines“). This mechanism utilizes the Special Rupee Vostro Account (“SRVA“), and these Guidelines are framed within the legal framework of the Foreign Exchange Management Law. They emphasize adherence to an agreement established between the Reserve Bank of India, the Department of Financial Service (DFS), the Ministry of Finance India, the CBM, and the Embassy of India in Myanmar.

The Guidelines cover both border and normal trade between the two countries. This newly implemented channel utilizes the SRVA facilitated by Punjab National Bank (“PNB“) (New Delhi) and its Yangon representative office. In Myanmar, CB Bank PCL and UAB Bank serve as designated banks, with the potential for future additions based on business needs. Moreover, they explicitly describe the mechanism with the Indian Rupee to be followed by designated banks. Designated banks must have the SRVA at PNB (New Delhi), and Myanmar-designated banks must open an Indian Rupee account for the importer/exporter under the SRVA. These Indian Rupee accounts can only be used for export earnings from India and import payments settled to India. Import payments and resale activities through Indian Rupee accounts of importers/exporters must comply with directives from the Foreign Exchange Supervisory Committee under the CBM.

Furthermore, they outline details for the “Agreement for Bilateral Trade Payments,” including ways to replenish funds in local designated banks’ SRVA, convert excess of the Indian Rupee in the SRVA to other foreign currencies, transfer funds among SRVA of local banks, and arrangements for Indian Rupee liquidity support if needed. The trade transaction settlements for regular payments must occur within two working days (Trade Date T+2). They specify various payment mechanisms for transactions, encompassing documentary collection (Document Against Acceptance – DA/ Document Against Payment – DP), advance payment via Telegraph Transfer (TT), open account arrangements with goods delivered first and payment later via TT, and the use of documentary credit/Letter of Credit (L/C). These methods provide flexibility and options for financial transactions per the outlined guidelines. The representative office must collaborate in addressing any transaction-related issues, including collecting or paying funds from local banks through SRVA accounts of PNB (New Delhi). Additionally, it should facilitate communication with PNB (New Delhi) and provide necessary support and information.

For designated banks, PNB (New Delhi) will facilitate the exchange rate to replenish the Indian Rupee to SRVA accounts and convert excess Indian Rupee in the SRVA to other foreign currencies at the market rate, as mutually agreed. The Indian Rupee/Myanmar Kyat exchange rate for local banks and importer/exporter transactions will be based on the market rate. PNB (New Delhi) is responsible for converting excess Indian Rupees in SRVA accounts of Myanmar-designated banks in PNB (New Delhi) to other currencies and transferring funds to the SRVA of another bank in the same country. PNB (New Delhi) must obtain permission from the Reserve Bank of India to replenish the Indian Rupee in the SRVA account from other currencies and to replenish from other Indian Rupee accounts of designated banks in Myanmar to SRVA accounts.

The Guidelines prescribe trade documents, bank charges, and daily reporting requirements to the Foreign Exchange Supervisory Committee under the CBM. Encryption, servers, and fraud detection tools must also be used for secure transactions. Banks must guarantee safe transactions for export/import customers and establish dispute resolution arrangements for potential disputes. Myanmar-designated banks, including exporters and importers, must adhere to all pertinent regulations issued by the Foreign Exchange Supervisory Committee under the CBM in this matter.

Having previously permitted the use of the Chinese Yuan for the Myanmar-China border trade and the Thai Baht for the Myanmar-Thailand border trade, the SAC has now extended approval for using the Indian Rupee in the Myanmar-India border trade. This decision aims to enhance the ease of trade payments and promote a smoother trade flow between the two countries. In conclusion, the SAC’s endorsement of the Indian Rupee for border trade signifies a continued effort to strengthen economic ties and facilitate cross-border commerce.