The Reserve Bank of India (RBI) has rolled out an ambitious set of reforms designed to promote the global use of the Indian rupee. These measures aim to strengthen its role in cross-border trade and reduce reliance on intermediaries like the US dollar.
Key Measures Announced
- Rupee-denominated lending to neighbors
Indian banks will now be allowed to extend loans in rupees to non-residents in countries such as Bhutan, Nepal, and Sri Lanka for trade-related transactions. - Transparent reference rates for currencies
The RBI plans to introduce official reference rates for the currencies of India’s major trade partners (for example, the UAE dirham, Indonesian rupiah), thereby reducing dependence on cross-currency conversions and simplifying trade settlement against the rupee. - Expanded use for SRVA balances
Funds held in Special Rupee Vostro Accounts (SRVAs) by foreign entities will now be eligible for investment in Indian corporate bonds and commercial papers — in addition to government securities. - Extended repatriation periods & trade flexibility
Exporters using IFSC (International Financial Services Centre) accounts can now repatriate funds within three months instead of one. Merchanting trade transactions also gain longer windows (from four months to six months) to settle.
Why These Moves Matter
- Lower transaction costs — By cutting out intermediary currencies, exporters and importers face fewer conversion layers.
- Boosting rupee’s global credibility — Enabling rupee-based trade and investment encourages wider acceptance among global players.
- Regional integration — Lending in rupee to neighbouring countries strengthens trade ties and expands rupee usage in South Asia.
- Greater capital market access — Permitting SRVA balances to flow into corporate debt opens new investment channels.
The RBI’s strategy reflects a phased, steady push toward rupee internationalisation — acknowledging that global trust, liquidity, and uptake take time to develop.
