SBI to Launch Rupee-Based Trade Settlement with Israel Amid FTA Talks

State Bank of India to Pioneer Rupee Trade with Israel, Bolstering Economic Ties

In a significant move to deepen financial integration, the State Bank of India (SBI), the nation’s largest lender, is poised to facilitate bilateral trade settlements between India and Israel in Indian rupees. This strategic initiative comes as both countries accelerate negotiations towards a comprehensive Free Trade Agreement (FTA), marking a decisive shift towards local currency usage in cross-border trade and reducing dependency on traditional third-party currencies like the US dollar.

Operationalizing Rupee-Denominated Trade

As the only Indian bank with a physical branch presence in Israel, SBI holds a unique position to implement this framework. According to  V Manivannan , the bank’s initiative operates under the Reserve Bank of India’s (RBI) broader framework, which permits international trade settlement in INR. The mechanism will allow Israeli exporters and importers to transact in rupees through a  Special Rupee Vostro Account , with payments directly linked to invoices for goods and services. This system streamlines transactions and mitigates exchange rate risks for businesses on both sides.

Regulatory Framework and Stakeholder Engagement

Israel has been formally included as a partner country under India’s rupee trade settlement system. SBI’s branch in Tel Aviv has secured all necessary regulatory approvals to operationalize the arrangement. To ensure widespread adoption, the bank is actively engaging with the business community through outreach programs. In collaboration with the  Israel-India Chamber of Commerce , SBI has organized stakeholder meetings and webinars, including targeted outreach to major Israeli defence firms that maintain substantial commercial ties with India.

Beyond Trade: Supporting the Indian Diaspora

SBI’s role extends beyond facilitating trade finance. With over 40,000 Indian workers recently entering the Israeli labour market, primarily in construction and agriculture sectors, the bank is expanding its services for the Indian diaspora. Its Tel Aviv branch is enabling the opening of Non-Resident Indian (NRI) accounts to streamline remittance processes. Furthermore, SBI is exploring partnerships with fintech companies and local Israeli banks to refine and strengthen INR remittance channels, thereby enhancing financial connectivity for the Indian community in Israel.

Strategic Context and Future Trajectory

This push for rupee-denominated trade coincides with reinvigorated diplomatic engagement between New Delhi and Jerusalem. High-level visits and discussions between leaders  Narendra Modi  and  Benjamin Netanyahu  have reinforced momentum toward finalizing an FTA. With a Bilateral Investment Treaty already signed and the terms of reference for the trade pact established, SBI’s expanded financial services position it as a pivotal bridge supporting the next phase of strategic economic cooperation. The move not only reinforces bilateral ties but also aligns with India’s broader vision of internationalizing the rupee and building resilient, multi-currency global trade ecosystems.

Key Facts for Competitive Examinations:

• India enables international trade settlement in INR via Special Rupee Vostro Accounts.

• SBI is the sole Indian bank with a branch presence in Israel.

• Rupee trade diminishes reliance on intermediary currencies like the US dollar.

• India and Israel are concurrently negotiating a Free Trade Agreement and have signed a Bilateral Investment Treaty.