Uday Kotak Calls For Taking The Battle On Reserve Currency

A sustained economic development in India would require a strategy to ensure convertibility of the Indian rupee, and explore possibility of becoming potential currency of trade, according to Uday Kotak, founder and director of Kotak Mahindra Bank Ltd.

"India has a shot on having the ability to build trust at global level," Kotak said at a two-day research conference held by Securities and Exchange Board of India and National Institute of Securities Markets on Wednesday. "India should take the battle on reserve currency."

Currently, the Indian rupee is partially convertible, which means that the currency cannot be freely swapped with any other currencies in trade. A convertible currency is any nation's legal tender that can be easily bought or sold on the foreign exchange market with little to no restriction.

Kotak highlighted that enormous printing of U.S. dollar has helped the world's largest economy gain dominance in trade and become a reserve currency. The U.S. dollar accounts for nearly 90% of foreign exchange transactions, according to data from the Bank of International Settlements.

"We should be concerned about capital formation in comparison to global countries," he said.

Further, Kotak also flagged growing relevance of cryptocurrency globally, which deters the corpus of funds available for investment in market assets.

"Future competition for markets is coming from crypto...Crypto is taking away tools of resources that can be used for capital formation instead," he said.