RBI announces steps to encourage cross-border transactions in Indian rupee

The Reserve Bank of India (RBI) on Thursday announced liberalised norms to encourage use of Indian Rupee and local/ national currencies to settle cross border transactions.

The decision comes at a time when the domestic currency is sliding and touched an all-time low of 86.70 per US dollar on Monday.

The Reserve Bank has already signed Memorandum of Understanding (MoU) with the central banks of the United Arab Emirates, Indonesia and Maldives to encourage cross-border transactions in local currencies, including Indian Rupee.

To encourage greater use of Indian Rupee (INR) for trade transactions, in July 2022, an additional arrangement in the form of Special Rupee Vostro Account (SRVA) was introduced. Several foreign banks have since opened SRVAs with banks in India.

"Overseas branches of Authorized Dealer banks will be able to open INR accounts for a person resident outside India for settlement of all permissible current account and capital account transactions with a person resident in India," the RBI on Thursday said while announcing the changes made in the extant FEMA regulations.

Under the liberalised FEMA regulations, persons resident outside India will be able to settle bona fide transactions with other non-residents using the balances in their repatriable INR accounts such as Special Non-resident Rupee account and SRVA.

Also, persons resident outside India will be able to use their balances held in repatriable INR accounts for foreign investment, including FDI, in non-debt instruments.

RBI further said Indian exporters will be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.

The decision on promotions of cross border transactions in INR and local / national currencies follows a review of the FEMA regulations of 1999 undertaken by the Reserve Bank in consultation with the central government.