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International Relations April 29, 2026 5 min read Daily brief · #37 of 44

India, Kenya discuss possibility of trade settlement in local currencies

The 10th Session of the India-Kenya Joint Trade Committee (JTC) was held in Nairobi, marking a milestone in bilateral trade and economic engagement. India-Ke...

GS Paper 2 (International Relations) GS Paper 3 (Economy Trade)

What Happened

  • The 10th Session of the India-Kenya Joint Trade Committee (JTC) was held in Nairobi, marking a milestone in bilateral trade and economic engagement.
  • India-Kenya bilateral trade rose by approximately 24.91% to USD 4.31 billion in FY 2025–26, up from USD 3.45 billion in the previous fiscal year.
  • Both sides discussed and acknowledged the potential for trade settlement in their respective local currencies (Indian Rupee and Kenyan Shilling), noting that Kenyan banks have opened Special Rupee Vostro Accounts (SRVAs) with Indian banks.
  • Discussions also covered expansion of the Unified Payments Interface (UPI) in Kenya and broader digital payment cooperation.
  • Key sectors discussed included pharmaceuticals, chemicals, engineering goods, and agriculture, with both sides exploring means to diversify trade and remove market access barriers.

Static Topic Bridges

Local Currency Settlement (LCS) Mechanism and Internationalisation of the Rupee

The Local Currency Settlement (LCS) system is a framework that enables bilateral trade to be denominated, invoiced, and settled in the domestic currencies of the two trading countries, eliminating dependence on a third-party currency such as the US dollar. India's Reserve Bank of India (RBI) introduced the framework for International Trade Settlement in Indian Rupees (INR) in July 2022, under the Foreign Exchange Management Act (FEMA), 1999. Under this mechanism, authorised dealer (AD) banks in India can open Special Rupee Vostro Accounts (SRVAs) for correspondent banks of partner countries. Exporters and importers on both sides can invoice in their domestic currencies; the accumulated rupee balances in SRVAs can then be used for investment in Indian government securities, import payments, and other approved purposes.

  • RBI's framework for rupee trade settlement was operationalised in July 2022.
  • As of 2024, the RBI has permitted banks from approximately 30 countries to open SRVAs with Indian banks.
  • A Vostro account is an account held by a foreign bank with a domestic bank, denominated in the domestic currency.
  • The LCS mechanism reduces foreign exchange conversion costs and insulates trade from global currency volatility.
  • India has active SRVA arrangements with Russia, UAE, Malaysia, and several other countries.

Connection to this news: Kenya's banks have already opened SRVAs with Indian banks, placing the India-Kenya LCS framework at an advanced stage. The JTC discussions signal intent to increase utilisation of this mechanism, moving beyond its formal existence to active deployment in bilateral trade settlement.

UPI (Unified Payments Interface) — Architecture and Global Expansion

UPI is a real-time payment system developed by the National Payments Corporation of India (NPCI) that enables instant inter-bank transactions through a mobile interface, using a Virtual Payment Address (VPA). It operates on the Immediate Payment Service (IMPS) infrastructure and is regulated by the Reserve Bank of India. NPCI International Payments Limited (NIPL) — a wholly-owned subsidiary of NPCI — manages UPI's international rollout. As of 2026, UPI is accepted in over 12 countries, including Singapore, UAE, France, Nepal, Bhutan, and Sri Lanka. NPCI is also assisting several countries in Africa and South America to build UPI-like domestic real-time payment systems.

  • UPI was launched in April 2016.
  • Cross-border UPI transactions grew over 20 times from FY24 to FY25 (from 37,060 to approximately 7,55,000 transactions).
  • NPCI International signed an agreement with the Bank of Namibia to develop a UPI-like system — the first collaboration with an African central bank to deploy the UPI stack.
  • Countries where UPI acceptance was active as of 2026 include Singapore, UAE, France, UK, Mauritius, Nepal, Bhutan, Sri Lanka, Malaysia, and others.
  • The RBI's Vision Document for Payment Systems has internationalisation of UPI as a strategic objective.

Connection to this news: Discussions on expanding UPI in Kenya align with India's broader Africa digital payments strategy, whereby NPCI targets assistance to countries in Africa and South America to develop digital payment infrastructure either accepting UPI or building UPI-equivalent systems.

India-Africa Economic Relations and Joint Trade Committees

Joint Trade Committees (JTCs) are bilateral institutional mechanisms for reviewing and expanding trade and economic ties. India maintains JTCs with several African countries as part of its India-Africa engagement framework. The India-Africa Forum Summit (IAFS), held three times (2008, 2011, 2015), established a structured framework for India-Africa cooperation in trade, development assistance, capacity building, and technology transfer. Kenya is one of India's most significant economic partners in East Africa. The Indian diaspora in Kenya — known as Kenya Indians — has historically played a role in bilateral commerce.

  • India-Kenya bilateral trade in FY26: USD 4.31 billion (up ~24.91% from FY25's USD 3.45 billion).
  • India's exports to Kenya include pharmaceuticals, machinery, chemicals, and vehicles.
  • Kenya's exports to India include tea, soda ash, and horticulture products.
  • The 3rd India-Africa Forum Summit (2015) committed USD 600 million in grant assistance and USD 10 billion in Lines of Credit to Africa.
  • India hosts a significant Kenyan Indian diaspora community.

Connection to this news: The 10th JTC session reflects the maturity and depth of the India-Kenya economic relationship. The focus on local currency settlement and digital payments marks a qualitative shift from commodity trade discussions toward financial architecture cooperation.

Key Facts & Data

  • India-Kenya bilateral trade FY 2025–26: USD 4.31 billion (up ~24.91% YoY)
  • Previous fiscal (FY25) trade: USD 3.45 billion
  • Venue of 10th JTC: Nairobi, Kenya
  • RBI rupee trade settlement framework: July 2022 (under FEMA 1999)
  • Countries with SRVAs with Indian banks: approximately 30 (as of 2024)
  • UPI launched: April 2016, by NPCI
  • NPCI International (NIPL) established: to manage global UPI expansion
  • Countries accepting UPI: 12+ as of 2026
  • Cross-border UPI transactions FY25: ~7,55,000 (20x growth from FY24)
  • Key sectors discussed: pharmaceuticals, chemicals, engineering goods, agriculture
  • NPCI-Bank of Namibia agreement: first deployment of UPI stack with an African central bank
On this page
  1. What Happened
  2. Static Topic Bridges
  3. Local Currency Settlement (LCS) Mechanism and Internationalisation of the Rupee
  4. UPI (Unified Payments Interface) — Architecture and Global Expansion
  5. India-Africa Economic Relations and Joint Trade Committees
  6. Key Facts & Data
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