Internationalization of the Indian Rupee

• 08 Jul 2023

On 5^th July, 2023, a working group appointed by the Reserve Bank of India (RBI) put forward several recommendations to expedite the internationalization of the Indian rupee. The recommendations aim to increase the use of the Indian currency in cross-border transactions.

The key recommendations are:

• Adoption of a Standardized Approach: Implementing a standardized approach for examining proposals on bilateral and multilateral trade arrangements for invoicing, settlement, and payment in the rupee and local currencies will streamline cross-border transactions and promote the use of the rupee in international trade.
• Opening of Rupee Accounts for Non-Residents: Encouraging the opening of rupee accounts for non-residents, both within India and outside the country, will facilitate easier access and usage of the rupee by foreign entities, promoting its internationalization.
• Integration of Payment Systems: Integrating Indian payment systems with those of other countries will enable seamless cross-border transactions, enhancing the efficiency and convenience of using the rupee for international payments.
• Development of a Global Rupee Market: Fostering the development of a global rupee market will ensure liquidity and accessibility of the currency across different time zones, facilitating round-the-clock trading and investment in rupee-denominated instruments.
• Recalibration of the Foreign Portfolio Investor (FPI) Regime: Reviewing and recalibrating the FPI regime will attract greater foreign investment in Indian markets and instruments denominated in rupees, deepening the rupee market and increasing its attractiveness to global investors.
• Review of Taxes on Masala Bonds: Evaluating and potentially revising taxes on masala bonds, which are rupee-denominated bonds issued outside India by Indian entities, will encourage their issuance and utilization, contributing to the internationalization of the rupee.
• Real-Time Gross Settlement (RTGS) for Cross-Border Trade: Exploring the international use of Real-Time Gross Settlement for cross-border trade transactions will ensure faster and more secure settlement of international payments in rupees.
• Inclusion of Indian Government Bonds in Global Indices: Working towards the inclusion of Indian Government Bonds in global bond indices will increase their visibility and attractiveness to international investors, enhancing the internationalization of the rupee.
• Efforts for Rupee Inclusion in IMF's SDR: Making efforts to include the rupee in the International Monetary Fund's Special Drawing Rights (SDR) basket will enhance the global recognition and acceptance of the rupee as an international reserve currency.