The Reserve Bank of India (RBI) is set to make a groundbreaking move this year by allowing rupee accounts to be opened outside the country. This decision is aimed at promoting the use of the Indian currency on a global scale. The central bank will permit Indian banks to lend in rupees to individuals residing outside India, as well as facilitate foreign direct investment and portfolio investment through special accounts like special non-resident rupee and special rupee vostro accounts.
In its annual report released on Thursday, the RBI stated its intention to promote the use of the rupee and other domestic currencies in the Asian Clearing Union (ACU) mechanism. This move is part of the RBI’s efforts to enhance the global role of the rupee and further internationalize the INR.
The push to internationalize the rupee gained momentum after an RBI-appointed working group recommended measures to accelerate the pace of local currency internationalization. The group suggested allowing non-residents to open rupee accounts outside the country, emphasizing the importance of this step in the currency’s internationalization process.
Additionally, the RBI has taken steps to facilitate export and import transactions in rupees, with the aim of increasing the global trading community’s interest in the domestic currency. These measures, although small, are seen as positive steps towards opening doors for future transactions.
Chief economist Madan Sabnavis of Bank of Baroda noted that while there may not be many takers for these facilities initially, they are crucial enabling steps for future transactions. The government has also signed agreements with seven countries to enable Unified Payments Interface (UPI) transactions in local currency, further promoting the use of the rupee on an international scale.