MUMBAI: RBI's Strategic Move to Boost Rupee's Global Presence

The Reserve Bank of India (RBI) has introduced groundbreaking rules aimed at promoting the rupee's use in international trade and investment. This significant policy change permits foreigners to open rupee accounts in overseas branches of Indian banks, facilitating easier cross-border transactions in the local currency.

These newly amended norms empower overseas branches of banks, which hold an authorised dealer licence from RBI, to establish rupee accounts for non-residents. Such accounts are designated for making payments or receiving funds for approved activities involving individuals or entities in India.

Expert Insights on the Policy's Impact

"The ability to open bank accounts in the currency of a country outside that country is a foundational element of the internationalization of a currency. This will accelerate the move towards invoicing and settlement transactions internationally using the rupee. The use cases and ecosystem are only going to grow," stated Srinivas Varadarajan, MD & head- global emerging markets, Deutsche Bank India.

Addressing Economic Challenges

This initiative arrives amidst the rupee facing pressure from a strengthening dollar and the withdrawal of foreign portfolio investors. By internationalizing the rupee, India aims to mitigate exchange rate risks, alleviate pressure on foreign exchange reserves, and enhance the country's current account balance. Additionally, it seeks to navigate geopolitical risks stemming from sanctions on trading partners.