“The Central bank is taking another step to internationalise the Rupee, seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time,” two sources mentioned.
The Reserve Bank of India (RBI) has requested the Union Government to enable home banks and their international branches to lend Rupees to overseas debtors to improve the use and acceptability of the native forex in commerce.
“The proposal, which was sent to the Finance Ministry last month, suggests lending in Rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka,” the sources mentioned.
“If successful, such Rupee-denominated lending could be extended to cross-border transactions globally,” one of many sources mentioned. According to Ministry of Commerce knowledge, 90% of India’s exports to South Asia had been to these 4 nations in 2024/25, amounting to practically $25 billion.
Currently, international branches of the banks are restricted to offering loans in foreign currency echange, and such loans are prolonged primarily to Indian companies. The sources declined to be recognized because the discussions are confidential. Emails despatched by Reuters to the Finance Ministry and the RBI requesting remark didn’t obtain a response.
The RBI has been taking steps to improve the usage of the Rupee in world commerce and funding. As a part of the technique, RBI lately permitted the opening of Rupee accounts for non-residents exterior India.
Earlier this month, Reuters reported that the RBI has sought authorities’s approval to take away the cap on international banks with so-called vostro accounts shopping for short-term sovereign debt, to enhance Rupee-denominated funding and commerce. “The RBI will open the foreign loans in Rupees only for the purpose of trade,” the sources mentioned.
Currently, Rupee liquidity is offered in different international locations solely by a restricted variety of government-backed credit score strains or bilateral forex swap preparations. “The objective is to reduce dependence on such arrangements and instead allow commercial banks to provide Rupee liquidity on market terms,” the primary supply mentioned, citing a communication from the central financial institution in April.
The second supply mentioned, “enabling easier access to rupee-denominated loans will help facilitate trade settlements in Rupees and reduce exposure to foreign exchange volatility.” “The government has received several requests from financial institutions to support strategic projects through rupee-denominated financing,” the second supply mentioned.
“India’s experience with local currency pacts with the United Arab Emirates, Indonesia, and the Maldives, as well as Special Rupee Vostro Accounts used for trade with Sri Lanka and Bangladesh, has underscored the need to deepen the availability of Rupee liquidity,” the supply mentioned.
“If implemented, the policy would mark a major step toward integrating the Rupee into the global financial system, positioning it as a more widely accepted currency for international trade and investment,” the second supply added.
Published – May 26, 2025 12:31 pm IST
