ADB includes Indian rupee for its Trade Finance Programme

Reflecting an increasing dominance of the Indian rupee, multilateral lender ADB has decided to support projects denominated in the domestic currency.

"ADB's Board of Directors today approved the inclusion of Renminbi and Indian rupee in the Trade Finance Programme (TFP)," the Manila-based institution said in a statement.

TFP fills market gaps by providing guarantees and loans to banks to support trade.

The ADB's TFP, which so far aided deals in US dollars, yen and euros, has supported over USD 10.6 billion in trade since 2009. The TFP is scheduled to end in 2013.

"At present, 90% of all foreign trade in Asia is settled in US dollars, but this percentage is expected to decline," ADB said.

Intra-regional trade in Asia in the next 10 years is expected to account for at least half of all foreign trade for Asian countries.

"This move will encourage the use of regional currencies in trade and reduce reliance on the US dollar as a settlement currency, which is in short supply in many countries," said Steven Beck, Head of ADB's Trade Finance Programme.

The TFP is active in 16 countries, including Bangladesh, Vietnam, Pakistan, Sri Lanka and Nepal. Its volumes have increased 40% in the first half of 2012 compared to the same period.