The Reserve Bank of India (RBI) has announced a series of measures aimed at promoting the Indian Rupee (INR) as a global currency. These initiatives, revealed on Wednesday, October 1, 2025, are designed to facilitate wider use of the INR in international trade transactions, reduce dependence on the US dollar, and strengthen India's position in the global financial system.

Key Measures Announced

• Cross-Border Lending in INR: Authorised Dealer (AD) banks in India can now lend in Indian Rupees to non-residents in Bhutan, Nepal, and Sri Lanka, including banks in these countries, to support cross-border trade. This move is expected to reduce trade costs and establish the rupee as a regional currency, diminishing reliance on the US dollar.
• Transparent Reference Rates: The RBI will establish transparent reference rates for the currencies of India's major trading partners to facilitate smoother INR-based settlements. These rates, which will be regularly updated and market-based, will enhance the competitiveness of Indian businesses in global trade. The central bank is considering including currencies like the Indonesian Rupiah and the United Arab Emirates Dirham.
• Wider Use of Special Rupee Vostro Accounts (SRVA): The RBI has expanded investment options for holders of Special Rupee Vostro Accounts (SRVAs), which were introduced in July 2022 to facilitate invoicing, payments, and settlement of exports and imports in INR. SRVA holders can now invest surplus balances in corporate bonds and commercial papers, in addition to government securities and treasury bills. This improves liquidity and makes INR-based trade settlements more efficient.
• Relaxation for Exporters: The RBI has extended the repatriation period for funds in International Financial Services Centre (IFSC) accounts from one month to three months to support exporters.

Benefits of Internationalizing the Rupee

The RBI's initiatives are expected to bring several benefits to the Indian economy:

• Reduced Dependence on the US Dollar: By promoting the use of the INR in international trade, India can reduce its reliance on the US dollar, shielding the economy from exchange rate fluctuations and currency crises.
• Increased Foreign Investment: Allowing SRVA balances to be invested in corporate bonds and commercial papers is expected to increase foreign capital inflows and boost demand for the rupee.
• Enhanced Trade Competitiveness: Transparent and regularly updated reference rates will make INR-based trade more reliable and competitive for Indian businesses.
• Strengthened Regional Integration: Promoting the use of the INR in trade with neighboring countries will strengthen India's economic diplomacy and bolster regional integration.

Current Economic Context

These measures come at a time when India's external sector remains strong. As of September 26, 2025, India's foreign exchange reserves stood at USD 700.2 billion, sufficient to cover more than 11 months of merchandise imports. In the first quarter of 2025-26, the current account deficit moderated to USD 2.4 billion (0.2% of GDP), down from USD 8.6 billion (0.9% of GDP) in the same period last year.

However, the INR has depreciated by 3.5% against the US dollar since March-end 2025, and the RBI is closely monitoring the currency's movements. Despite this depreciation, the rupee has remained among the least volatile emerging market currencies.

RBI Governor Sanjay Malhotra has affirmed that the central bank is closely monitoring the movements of the INR and will take appropriate steps as warranted.

Looking Ahead

The RBI's measures to internationalize the rupee represent a long-term strategy to integrate India more closely into the global financial system. While challenges remain, such as global economic instability and geopolitical risks, these initiatives are positive steps toward making the rupee a preferred medium of exchange for neighboring countries and establishing India as a stable and reliable global economic force.