RBI will take steps to encourage cross border transactions in rupees
New Delhi| The Reserve Bank of India (RBI) announced liberal norms to encourage the use of rupee and local/national currencies for settlement of cross-border transactions. The decision comes at a time when the domestic currency is in decline and hit an all-time low of 86.70 per US dollar on Monday. The Reserve Bank of India has already signed Memorandums of Understanding (MoUs) with the central banks of the UAE, Indonesia and Maldives to encourage cross-border transactions in local currencies, including the rupee.
To encourage greater use of the Indian Rupee (INR) for trade transactions, in July 2022, an additional arrangement was introduced in the form of the Special Rupee Vostro Account (SRVA). Since then many foreign banks have opened Vostro with banks in India.
“Overseas branches of authorized dealer banks will be able to open INR accounts for anyone residing outside India to settle all admissible current account and capital account transactions with someone residing in India”, the RBI said on Thursday, announcing changes made to existing FEMA rules.
Under the simplified FEMA rules, people living outside India will be able to make genuine transactions with other non-residents using the balance in their repatriable INR accounts like special non-resident rupee accounts and SRVA. Additionally, individuals living outside India will be able to use their balances held in repatriable Indian Rupee accounts for foreign investment, including FDI in non-loan instruments.
RBI further said that Indian exporters will be able to open accounts abroad in any foreign currency for settlement of trade transactions, including receiving export earnings and using this earnings to pay for imports. The decision to promote cross-border transactions in the Indian Rupee and local/national currencies has been taken following a review of the FEMA Regulations of 1999 by the Reserve Bank of India in consultation with the Central Government.
