SBI to Enable Rupee Trade as India, Israel Push FTA Talks

India’s largest lender, the State Bank of India, is set to play a pivotal role in deepening economic ties between India and Israel by facilitating bilateral trade settlements in Indian rupees. The move comes as both countries accelerate discussions towards a comprehensive Free Trade Agreement, signalling a shift towards greater use of local currencies in cross-border trade and closer financial integration.

SBI’s Rupee Settlement Plan for India–Israel Trade

The “State Bank of India”, the only Indian bank with a physical presence in Israel, plans to enable exports and imports between the two countries to be settled in Indian rupees. According to “V Manivannan”, the initiative aligns with the Reserve Bank of India’s framework allowing international trade settlement in INR. Under this mechanism, Israeli exporters and importers will receive and make payments in rupees through a Special Rupee Vostro Account, linked to invoices for goods and services.

Regulatory Backing and Trade Infrastructure

Israel has been identified as one of the partner countries under India’s rupee trade settlement system. SBI’s Tel Aviv branch has secured all regulatory approvals to operationalise the arrangement and has been actively engaging with stakeholders to promote awareness. In collaboration with the “Israel-India Chamber of Commerce”, the bank has organised meetings and webinars, including outreach to major Israeli defence firms with strong commercial links to India.

Support for Indian Workforce and Diaspora

Beyond trade finance, SBI is expanding services for the growing Indian workforce in Israel, particularly in construction and agriculture. With over 40,000 Indian workers recently joining the Israeli labour market, the bank is facilitating remittances by enabling the opening of NRI accounts through its Tel Aviv branch. SBI is also exploring partnerships with fintech firms and local banks to streamline INR remittance channels, strengthening financial connectivity for the Indian diaspora.

Imporatnt Facts for Exams

• India allows international trade settlement in INR through Special Rupee Vostro Accounts.
• SBI is the only Indian bank with a branch presence in Israel.
• Rupee trade reduces dependence on third-country currencies like the US dollar.
• India and Israel are negotiating a Free Trade Agreement alongside a Bilateral Investment Treaty.

FTA Momentum and Strategic Economic Engagement

The push for rupee-denominated trade coincides with intensified diplomatic engagement between the two countries. High-level visits in 2025 and recent discussions between “Narendra Modi” and “Benjamin Netanyahu” have reinforced momentum towards an FTA. With a Bilateral Investment Treaty already signed and terms of reference for the trade pact in place, SBI’s expanded role positions it as a key financial bridge supporting the next phase of India–Israel economic cooperation.