RBI making efforts to internationalise Indian Rupee

The Reserve Bank of India (RBI) has asked the Union Government to allow domestic banks and their foreign branches to lend Rupees to overseas borrowers to enhance the use and acceptability of the local currency in trade.

- BY S VENKAT NARAYAN

“The Central bank is taking another step to internationalise the Rupee, seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time,” two sources said.

(Internationalization of the Rupee refers to a process that involves increasing the use of the rupee in cross-border transactions. It involves promoting the rupee for import and export trade and then other current account transactions, followed by its use in capital account transactions.)

“The proposal, which was sent to the Finance Ministry last month, suggests lending in Rupees to non-residents can begin in neighbouring countries such as Sri Lanka, Bangladesh, Bhutan and Nepal,” Reuters quoted the sources saying.

“If successful, such Rupee-denominated lending could be extended to cross-border transactions globally,” one of the sources said. According to Ministry of Commerce data, 90% of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly $25 billion.

Currently, foreign branches of the banks are restricted to providing loans in foreign currencies, and such loans are extended mainly to Indian firms.

The RBI has been taking steps to increase the use of the Rupee in global trade and investment. As part of the strategy, RBI recently permitted the opening of Rupee accounts for non-residents outside India.