India’s Currency Ambitions

For decades, the US dollar has dominated global trade, with most countries pegging their cross-border transactions to it. But as India’s economy expands and its global footprint widens, the Reserve Bank of India (RBI) is seeking to give the Indian Rupee (INR) a stronger role on the world stage. In its latest move, the central bank has unveiled a fresh set of measures designed to make the rupee an accepted medium of trade, finance, and investment beyond India’s borders.

Loans in Rupees for Neighbours

One of the most significant steps announced is the permission for authorised dealer (AD) banks to extend trade-related loans in rupees to non-residents from Bhutan, Nepal, and Sri Lanka. This initiative is expected to reduce reliance on third currencies like the dollar in South Asia.

The timing is strategic. Nearly 90% of India’s exports to the region—worth around $25 billion in 2024–25—were directed to these economies. By offering rupee-denominated loans, India hopes to both strengthen regional integration and cement the rupee’s position as a settlement currency.

Transparent Currency Benchmarks

The RBI also plans to make cross-border invoicing in rupees easier by expanding reference rates. Until now, it has only published benchmark rates for the US dollar, euro, yen, and pound sterling. Going forward, the central bank will introduce reference rates for currencies of key trading partners like the Indonesian rupiah and UAE dirham.

As Deputy Governor T. Rabi Sankar explained, predictable benchmarks will reduce the need for cross-currency conversions, offering exporters and importers greater clarity and confidence. This step enhances the rupee’s credibility as a dependable unit of trade settlement.

Expanding the Role of Vostro Balances

Another important measure targets the Special Rupee Vostro Accounts (SRVAs). These accounts, currently restricted to trade settlements and government securities, will now be allowed to invest in corporate bonds and commercial papers.

The move opens up India’s capital markets to foreign banks, creating new demand for rupee-denominated assets and providing global players with more options to park their funds. For India, this will deepen liquidity and attract more investment into domestic financial instruments.

Building Blocks for Globalisation of the Rupee

These measures are not standalone. They follow earlier efforts like bilateral rupee trade agreements and the use of UPI for cross-border payments, gradually constructing the framework for rupee internationalisation.

A Measured but Strategic Leap

The RBI’s new steps reflect a careful but determined attempt to position the rupee as more than a domestic currency. By easing trade loans, introducing transparent benchmarks, and widening the use of Vostro balances, India is laying down the groundwork for the rupee’s acceptance in global markets.

While the dollar’s dominance will not fade overnight, these initiatives mark a clear intent: to align India’s financial power with its economic rise and eventually secure the rupee a seat at the table of international currencies.

(With agency inputs)