RBI announces measures to boost cross-border transactions in Indian rupee

The Reserve Bank of India (RBI) on Thursday announced a slew of measures to promote cross-border transactions in the Indian Rupee (INR) and local currencies of trading partner countries.

The central bank said the steps follow a comprehensive review of regulations under the Foreign Exchange Management Act (FEMA), 1999, undertaken in consultation with the central government.

The liberalised FEMA regulations allow overseas branches of authorised dealer banks to open INR accounts for persons residing outside India. These accounts can be used for settling permissible current and capital account transactions with Indian residents.

Also, non-residents can now settle bona fide transactions with other non-residents using balances in their repatriable INR accounts, such as Special Non-resident Rupee Accounts (SNRR) and Special Rupee Vostro Accounts (SRVA).

The balances in these accounts can also be used for making investments, including foreign direct investment (FDI) in non-debt instruments.

Indian exporters have been provided greater flexibility with the ability to open accounts in foreign currencies overseas. These accounts can be used to settle trade transactions, receive export proceeds, and make payments for imports, the RBI said.

The RBI had earlier introduced SRVA in July 2022 to encourage the use of INR for international trade. Since then, several foreign banks have opened such accounts with Indian banks.

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