The Reserve Bank of India (RBI) announced plans to allow rupee accounts to be opened outside the country this year, aiming to promote the international use of the Indian currency. This move will enable Indian banks to extend rupee-denominated loans to individuals residing outside India. Additionally, the RBI will facilitate foreign direct investment and portfolio investment through specialized accounts, such as special non-resident rupee and special rupee vostro accounts.
“Permitting opening of INR account outside India by persons resident outside India INR lending by Indian banks to PROIs; and enabling foreign direct investment (FDI) and portfolio investment through special accounts [viz., special nonresident rupee (SNRR) and special rupee vostro account (SRVA)],” RBI said in its Annual Report for FY24.
Forex framework
It said it would make a framework for a comprehensive integrated reporting of forex transactions; and undertake measures to improve the role of GIFT City at Gandhinagar, Gujarat vis-à-vis other international financial centres.
The central bank’s initiatives also include promoting the use of the rupee and other domestic currencies within the Asian Clearing Union (ACU) mechanism. The RBI’s annual report highlighted the department of external investments and operations’ unique position in evaluating the international economic and monetary environment, underlining the central bank’s commitment to enhancing the global role of the Indian rupee.
“Rationalisation of regulations towards promoting the internationalisation of the INR was undertaken to enable the settlement of bilateral trade in local currencies. Going forward, the liquidity operations would continue to be in sync with the stance of the monetary policy, while the foreign exchange operations would be guided by the objective of ensuring orderly movements in the exchange rate of the Rupee,” the RBI report said.
Earlier steps
To support bilateral trade in local currencies, the RBI had previously permitted banks in July 2022 to open and maintain Special Rupee Vostro Accounts (SRVAs) for partner banks from other countries. The efforts to internationalise the rupee have gained momentum following recommendations from an RBI-appointed working group in July 2023, which suggested various measures to accelerate the internationalisation of the local currency.
