Internationalising of Rupee: The Reserve Bank on Wednesday announced a series of measure to boost the Indian Rupee’s role in global trade, promoting its use for cross-border settlements and reducing dependence on the US dollar.RBI Governor Sanjay Malhotra, highlighted India’s steady progress in promoting the rupee for international transactions and unveiled three measures in this regard:
- Cross-Border Lending in INR: RBI Governor announced that Authorised Dealer (AD) banks are now allowed to lend in Indian Rupees to non-residents from Bhutan, Nepal, and Sri Lanka, marking a significant step in India’s ongoing efforts to expand the rupee’s use in international trade.
- Transparent Reference Rates: RBI will establish reference rates for currencies of India’s major trading partners to facilitate smoother INR-based settlements.
- Wider Use of Special Rupee Vostro Accounts (SRVA): Foreign banks can now use their SRVA balances to invest in corporate bonds and commercial papers, improving liquidity and making INR-based trade settlements more efficient.
SRVAs, accounts maintained by foreign banks with Indian banks, facilitate direct trade settlements in Indian Rupees. These measures aim to reduce reliance on the US dollar and protect the economy from sudden currency fluctuations and exchange rate risks.India’s external sector continues to show strong fundamentals. In Q1 of 2025-26, the current account deficit moderated to USD 2.4 billion (0.2% of GDP), down from USD 8.6 billion (0.9% of GDP) in the same period last year, supported by robust services exports and strong remittance inflows despite a higher merchandise trade deficit.As of September 26, 2025, India’s foreign exchange reserves stood at USD 700.2 billion, enough to cover more than 11 months of merchandise imports, providing a strong buffer against external shocks, the RBI governor said.Governor Malhotra noted that rising global trade uncertainties continue to influence India’s merchandise trade, but, “India’s services exports, driven by software and business services, witnessed robust growth in July-August 2025.”With healthy remittances, India is well-positioned to keep the current account deficit (CAD) sustainable in 2025-26, he said .“Notwithstanding the robust domestic macroeconomic fundamentals, the INR has witnessed some depreciation accompanied by phases of volatility. RBI is keeping a close watch on movements of the INR and will take appropriate steps, as warranted,” he added.RBI decided to keep the repo rate unchanged at 5.5% and maintain a neutral stance. Since February 2025, the RBI has cumulatively reduced the policy rate by 100 basis points—25 basis point each in February and April, and 50 basis point in June, following easing retail inflation.Governor Malhotra indicated that while GST rate rationalisation may temper consumption and growth, and trade-related tariff developments could slow expansion in H2, the Indian economy remains on a strong growth trajectory.
About the Author
