MUMBAI: The Reserve Bank of India (RBI) has announced new rules to encourage the use of rupee in international trade and investment. These changes allow foreigners to open rupee accounts overseas, making it easier to use the local currency for cross-border transactions.
The amended norms allow overseas branches of banks with authorised dealer licence from RBI to open rupee accounts for people who live outside India. These accounts can be used to make payments or receive money for approved activities involving people in India.
"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," said Srinivas Varadarajan, MD & head- global emerging markets, Deutsche Bank India.The move comes at a time when the rupee has come under pressure due to a stronger dollar and exiting foreign portfolio investors. Internationalizing the rupee can mitigate the exchange rate risks, reduces pressure on foreign exchange reserves, and improve India's current account balance. It also addresses geopolitical risks arising out of sanctions on trading partners.
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