'Rupee may find traction in neighbourhood before going international'

India's plans to internationalize the domestic currency are likely to find traction in its immediate neighbourhood in the first instance, as it works its way through other emerging economies, Exim Bank deputy managing director N. Ramesh said.

- Rhik Kundu & Shashank Mattoo

This is because of the absence of a market exchange mechanism for rupee trade in these countries.

"Recently, rupee trade was enabled between ICICI bank and Bangladeshi banks. Once people (exporters) start feeling more comfortable with dealing with Bangladeshi banks, this will gather steam," he told Mint.

Since July, Bangladesh has begun to settle trade within India in rupees as it attempts to cut its reliance on the dollar.

The Bangladeshi Central Bank has permitted three lenders-Sonali Bank, Eastern Bank and State Bank of India-Bangladesh to open Vostro accounts with Indian banks.

A Vostro account is a bank account held by a domestic bank on behalf of a foreign bank.