Reserve Bank of India rolls out steps to boost Rupee power overseas todayheadline

The Reserve Bank of India (RBI) Thursday allowed banks to open rupee accounts at their overseas branches for people residing outside the country in the latest regulatory move aimed at helping achieve the rupee’s internationalisation. The RBI said on its website that people residing outside India will now be able to settle transactions with other people residing outside the country using balances in their repatriable rupee accounts, such as special non-resident rupee account and Special Rupee Vostro Account (SRVA).

SRVA operations would require prior RBI approval.

Under these new kinds of accounts, the settlement through rupees is an additional arrangement within the existing system that uses freely convertible currencies. This will work as a complimentary system, reducing dependence on hard (freely convertible) currency, the RBI said in the explainer—or frequently asked questions (FAQs)—that outlined the mechanism to be used.

SRVAs were introduced in July 2022, and several foreign banks have since opened such accounts with banks in India. The Reserve Bank has also signed a memorandum of understanding (MoU) with the central banks of the United Arab Emirates (UAE), Indonesia and the Maldives to encourage cross-border transactions in the respective local currencies.With the latest regulatory latitude offered Thursday, overseas branches of Indian banks will be able to open rupee accounts for a resident from outside India for settlement of all permissible current account and capital account transactions with a person residing in India.People residing outside India will be able to use their balances held in repatriable rupee accounts for foreign investment, including foreign direct investment, in non-debt instruments. Indian exporters will also be able to open accounts in any foreign currency overseas for settlement of trade transactions, including for receiving export proceeds, and for using these proceeds to pay for imports.

In its annual report on Currency and Finance published in July 2024, the RBI had listed bilateral or multilateral trade and payment arrangements, special vostro accounts, local currency settlements, and bilateral swap arrangements as avenues to internationalise the rupee.

The report had suggested multilateral arrangements, such as those with the Asian Clearing Union (ACU), SAARC Currency Swap Framework, the UPI-PayNow linkage between India and Singapore and bilateral mechanisms like those with the Central Bank of the UAE, be harnessed to internationalise the rupee and support liquidity arrangements, especially during financially trying periods.