RBI Relaxes Rules to Promote Use of Indian Rupee in International Trade
The RBI has taken some significant steps towards the promotion of INR as well as local currencies in foreign trade. Those are part of the efforts put in by way of relaxation of some rules of Foreign Exchange Management Act, which enables the trading activities and investments being made flexible and free.
The RBI initiated a system in July 2022, Special Rupee Vostro Account (SRVA), which led to the use of INR in international trade. Since then, many foreign banks have opened SRVAs with Indian banks. India also has an agreement with the United Arab Emirates, Indonesia, and the Maldives to carry out trade using their local currency along with INR.
In December 2023, the RBI amended the Foreign Exchange Management (Manner of Receipt and Payment) Regulations. The RBI added an amendment whereby cross-border payment transactions can also be made with foreign or domestic currencies other than INR, thus making the process of cross-border transactions simple and easy with an aim for an increase in acceptance of the Indian Rupee on an international front.
To promote the use of INR and local currencies, RBI, in consultation with the Central government, amends and updates FEMA. New amendments are as follows:
1. Opening INR accounts abroad: It shall be open to foreign branches of Indian Banks known as the authorized dealer bank, to accept in India inhabitants having their abroad residing allowance to make any current/capital account transfers by opening In-Indian Currency Account with themselves in India.
2. Residents and trade transaction: Genuine trade transaction involving non-resident account can take place using balances from an INR Account in SNRRA and SRVA;
3. FDI in non- debt INR instruments: Open any INR-account to effect any Investment in India or Foreign Direct investment in any kind of non-debt instruments.
4. Exporters and Currency Accounts Abroad: Indian exporters can now open currency accounts abroad to settle trade payments and receive export proceeds. Such funds can also be used for paying imports.
These changes will make international trade and investment more convenient for businesses and individuals making the Indian Rupee more widely used and accepted around the world.
