Mumbai, Oct 1 The Reserve Bank of India (RBI) on Wednesday announced more measures to facilitate wider use of the Indian Rupee and local currencies in international trade transactions.
“For months now, the government has been taking steps to internationalise the rupee, which refers to the process of making the Indian currency widely accepted and used for global trade, finance, and investment. We have been making steady progress in this regard," RBI Governor Sanjay Malhotra said.
As a calibrated step in this direction, it has been decided that Authorized Dealer banks in India and their overseas branches may be permitted to lend in INR to persons resident in Bhutan, Nepal, and Sri Lanka, including a bank in these jurisdictions, to facilitate cross border trade transactions. The amendments to regulations will be notified shortly, according to an RBI statement.
In order to promote the settlement of cross border transactions in INR and local currencies, the Reserve Bank of India has been progressively liberalising regulations under the Foreign Exchange Management Act. To take this initiative further, it is essential that INR liquidity is made available and accessible to residents of other countries, the statement explained.
Another measure that has been taken in this regard is to allow additional reference rates to be published by Financial Benchmarks India Limited.
Over the years, the development of Forex market has facilitated the growing integration of the Indian economy with the rest of the world in terms of trade and capital flows. At present, Financial Benchmarks India Limited (FBIL) publishes reference rates for USD, EUR, GBP and JPY against INR.
These rates are widely used for settlement of Forex transactions including derivatives. It is now proposed to include select currencies of India’s major trading partners in the list of reference rates published by FBIL. This is expected to further deepen the onshore Forex market and encourage banks to quote directly in a larger set of currency pairs, thus eliminating the need for multiple currency conversions and making trade more efficient. FBIL has been advised to publish the new reference rates in consultation with the market, according to the official statement.
The RBI has also decided to expand the bouquet of investments for Special Rupee Vostro Accounts (SRVA) holders.
To promote exports from India and to support increasing interest of global trading community in INR, the RBI had permitted SRVA in July 2022 to facilitate invoicing, payment, and settlement of exports/imports in INR.
The arrangement permitted, inter alia, Rupee surplus balances in SRVA to be invested in government securities including treasury bills. To expand investment opportunities in India for SRVA holders, it has now been decided to permit balances of these accounts to be invested in corporate bonds and commercial papers. The revised regulations will be notified shortly, the RBI statement added.
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