The Reserve Bank of India (RBI) has introduced significant relaxations under the Foreign Exchange Management Act (FEMA) to encourage the use of the Indian Rupee (INR) and local currencies for cross-border transactions. This move is aimed at boosting trade and investment while reducing reliance on major global currencies.
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To further enhance investment opportunities, the RBI has allowed non-residents to utilise balances in their INR accounts for foreign investments, including foreign direct investments (FDI) in non-debt instruments. Indian exporters are also granted the flexibility to open foreign currency accounts overseas to settle trade transactions, receive export proceeds, and use these funds for imports.
The RBI’s efforts align with broader initiatives to promote INR and local currencies in international trade. This includes the introduction of SRVAs in July 2022, leading to foreign banks opening accounts with Indian banks, and Memorandums of Understanding (MoUs) signed with central banks in the UAE, Indonesia, and the Maldives.
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The latest changes build on the December 2023 revision of FEMA regulations, which enabled cross-border transactions in all foreign and local currencies, including INR. These measures are expected to strengthen the INR’s role in global trade while supporting India’s economic and financial integration with trading partners.
The Reserve Bank has also signed Memorandum of Understanding with the central banks of the United Arab Emirates, Indonesia and Maldives, to encourage cross-border transactions in local currencies.
