RBI unveils three measures to boost rupee internationalisation, expand SRVA

RBI announced lending in rupees to neighbours, transparent reference rates, and expanded SRVA use in corporate bonds and commercial papers to advance rupee internationalisation

In a push to internationalise the Indian rupee, the Reserve Bank of India (RBI) on Wednesday announced three measures to boost its use in cross-border trade — permitting Indian banks to lend in rupees to non-residents in Bhutan, Nepal and Sri Lanka; establishing transparent reference rates for major trading partner currencies; and expanding the scope of Special Rupee Vostro Account (SRVA) balances to include investments in corporate bonds and commercial papers.

 

T Rabi Sankar, Deputy Governor of the RBI, said during the post-policy press conference that India plans to expand its rupee reference rate framework beyond the current four currencies, with the Indonesian Rupiah and the UAE Dirham among those under consideration. The move aims to reduce reliance on crossing currencies for rate discovery and to support wider international use of the rupee.

 

He noted that benchmark reference rates are still being worked out because of limited active transactions. The process will be led by the Financial Benchmarks India Ltd (FBIL), with the expectation that market activity will increase once reference rates are published.

 

“The objective is that you minimise the use of crossing currencies to get rates. That will help both our currency as well as the other currency. We are currently looking at a couple of currencies. We are looking at the Indonesian Rupiah as one,” Sankar said.

 

“We are looking at the UAE Dirham as another. But there are a few others. We will gradually keep taking them up. On benchmark, we will have to see because there are not many active transactions to begin with. So, FBIL has to work out the best way of initiating something. This is a case where the reference rate has to be shown first and the market has to pick up from there. We will have to work out ways of how we arrive at the benchmark, keeping those things in mind,” he added.