RBI To Further Internationalise Rupee, Improve Role Of GIFT City: Annual Report
It plans to do this through settlement of bilateral trade in local currency.
The Reserve Bank of India is ramping up efforts to boost the internationalisation of the Indian rupee and liberalise regulations for non-residents.
It plans to do this through settlement of bilateral trade in local currency. However, one of the major steps is a review of Foreign Exchange Management (Deposit) Regulations, in consultation with the government, it said in its report for the year-ended March.
"To promote the internationalisation of INR and support local currency settlement with partner countries, it's necessary to liberalise the regulations relating to INR accounts for non-residents," the central bank said.
A proposal to rationalise mode of payment and reporting requirement regulations under FEMA (Foreign Exchange Management Act) Regulation 395 is also under review. As a part of the process, additions/modifications, if any, would be made.
The regulator is also undertaking a review of Foreign Exchange Management (Guarantees) Regulations, 2000, to address problems during cross-border transactions, faced by residents in India.
As part of this, RBI's agenda for the ongoing fiscal includes:
Permitting opening of Indian rupee accounts outside India by persons resident outside India.
Indian rupee lending by Indian banks to PROIs.
Enabling foreign direct investment and portfolio investment through special accounts.
In December 2023, the regulator rationalised rules for internationalisation of Indian rupee.
Back then, it allowed receipt/payment in any foreign currency, which would aid in local currency settlement with the partner countries. It also allowed INR settlement for all non-Asian Currency Union countries for non-trade and trade transactions.
RBI is also taking steps to improve the role of GIFT City in Gandhinagar, Gujarat vis-à-vis other international financial centres.
For this, it plans to encourage trading of FCY-INR (foreign currency-Indian rupee) pairs for different foreign currencies and review IFSC regulations under FEMA.
