Govt to Promote Rupee as an International Currency

Finance minister Nirmala Sitharaman, has reiterated government’s intention to promote rupee as an international currency. She said the government will simplify rules to promote FDI and overseas investment in India, seeking to promote the use of rupee in such transactions.

This year the central bank said it will let persons resident outside India (PROIs) to open rupee accounts outside the country, and allow bank lending to PROIs. It said it would allow FDI and FPI investments through special non-resident rupee and vostro accounts.

But making rupee an international currency is easier said than done. Bankers say global currencies like the dollar are liquid and countries like the US still control vast amounts of global trade.

“These currencies are fully convertible and taking out and bringing in large sums of money is far easier and quicker… the rupee is not fully convertible on the capital account. While India’s trade is growing it is still not among the biggest in the world. To make rupee an international currency a lot of changes in the financial stack as well as capital account will have to be made,” said a Banker.

RBI regulations include measures announced in July 2022 to allow an additional arrangement for invoicing, payment, and settlement of exports/imports in local money. Exports and imports have been allowed to be denominated and invoiced in rupee. But banks still need nod from RBI before allowing companies to use these facilities.