7 January, 2026
New Delhi – In a significant move to strengthen economic ties between India and Israel, the State Bank of India (SBI) has decided to allow trade settlements between the two countries in Indian Rupees (INR). This decision was made in collaboration with the Reserve Bank of India (RBI), after Israel was included in the RBI’s framework for international trade settlements using the rupee.
This initiative allows Indian and Israeli exporters and importers to invoice, make payments, and receive funds directly in Indian currency, thus eliminating the need to process transactions through third-party currencies like the US dollar.
The program is part of the Reserve Bank of India’s (RBI) broader strategy, which was initially introduced in July 2022, to promote the use of the Indian rupee in international transactions. Under this policy, the RBI allows Indian banks to establish Special Rupee Vostro Accounts (SRVAs) with banks in partner countries. Recently, Israel has been added as one of these partner nations.
After obtaining the necessary regulatory permits from both Indian and Israeli authorities, SBI, the only Indian bank with a physical presence in Israel through its Tel Aviv branch, decided to implement rupee-based trade settlement.
The Rupee Settlement System’s Operation
In the revised arrangement:
- Indian rupees can be used for pricing and invoicing trade with Israel.
- A Special Rupee Vostro Account kept by SBI’s Tel Aviv branch would be used to settle payments.
- Israeli importers can pay in rupees without converting money into dollars or euros, while Indian exporters will be paid in INR straight.
For enterprises on both sides, this method expedites transaction deadlines, lowers currency-related risks, and cuts foreign exchange conversion costs.
Why This Move Is Important
The choice is significant from an economic and strategic standpoint:
- The choice is significant from an economic and strategic standpoint:
- It helps India achieve its long-term objective of lowering its reliance on the US dollar in international trade.
- It supports India’s endeavor to establish the rupee as a reliable medium of exchange for international trade.
- For Indian exporters, particularly MSMEs, it streamlines trade operations.
- By providing affordable settlement choices, it increases the appeal of trade with India for Israeli businesses.
The connection is strategically important, encompassing industries like defense, technology, agriculture, pharmaceuticals, chemicals, and innovation-driven industries, even if India-Israel trade volumes are very small when compared to India’s trade with major allies.
India–Israel Economic Ties
The rupee settlement system is being implemented at a time when Israel and India are vigorously expanding their commercial ties. Both nations are considering the prospect of a Free Trade Agreement (FTA) in the future and have previously signed a Bilateral Investment Treaty (BIT).
By easing financial and currency-related barriers, the new settlement framework is expected to encourage higher trade volumes and smoother investment flows, particularly in high-value and technology-oriented sectors.
Role of SBI in Israel
In addition to trading settlements, SBI’s Tel Aviv office is crucial to the Indian labor force in Israel, especially in the construction and agricultural sectors. The bank is assisting with:
- NRI and local account opening
- Indian workers’ remittance services
- Transferring revenues back to India more easily
This gives the two countries’ financial connection a socioeconomic and people-to-people component.
An important development in India’s international trade policy is the State Bank of India’s decision, backed by the Reserve Bank of India, to allow rupee-based trade settlements with Israel. This move not only enhances bilateral trade but also supports India’s objective of increasing the rupee’s role in global trade.
As more partner countries implement similar mechanisms, India’s currency-driven trade diplomacy is steadily transforming cross-border transactions SBI is pivotal in converting policy vision into operational reality.
“As India expands the global footprint of its currency, rupee-based trade is fast becoming a strategic economic tool.”
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