RBI to facilitate opening rupee accounts outside India in a bid to boost the use of the Indian currency overseas

The Reserve Bank of India (RBI) on Thursday allowed persons resident outside India (PROIs) to open rupee (₹) accounts, as part of its 2024-25 agenda for globalising the domestic currency. This move by the central bank, will allow Indian banks to lend in rupees to the PROIs. The RBI wants the use of the rupee and other domestic currencies in the Asian Clearing Union (ACU) mechanism.

According to its annual report published on Thursday, the RBI will also facilitate foreign direct investment (FDI) and portfolio investment through special non-resident rupee and special vostro accounts.

“INR lending by Indian banks to PROIs and enabling foreign direct investment (FDI) and portfolio investment through special accounts [special nonresident rupee (SNRR) and special rupee vostro account (SRVA)," the report said.

The regulator of the Indian banking system, RBI has readied a strategic action plan for 2024-25 with measures to streamline the external commercial borrowing (ECB) framework, apart from going live for phase I of the platform for ECBs and trade credits reporting and approval (SPECTRA) project.

The impetus will be on the continuous synchronisation of the FEMA (Foreign Exchange Management Act) operating framework with the evolving macroeconomic landscape, and the main focus will be on rationalising various guidelines, the report mentioned.

The RBI is also working to enhance the role of GIFT City in Gandhinagar, Gujarat, to compete better with other international financial centres.

The move to internationalise the rupee came from the suggestions of an RBI-appointed working committee formed in July 2023. The group recommended various measures to hasten the internationalisation of the local currency. The inter-departmental group, helmed by RBI executive director Radha Shyam Ratho, noted that allowing non-residents to open accounts in a currency outside their home country is essential for making that currency more international.

In July, the RBI requested banks to set up extra measures for export and import transactions in rupees due to growing interest in the currency. By November 2023, the RBI went a step further, allowing banks to open additional current accounts for export earnings alongside special rupee vostro accounts, aiming to give exporters more operational flexibility.

Meanwhile, the Indian government has entered into agreements with seven countries to make Unified Payments Interface (UPI), which will help Indian nationals to transact in local currency.