India has long worked to establish the rupee as a major reserve currency. The Indian government is currently urging nations with a scarcity of dollars to settle their trade obligations in Indian rupee as part of efforts. This is in response to the US Federal Reserve’s recent greatest tightening of monetary policy in decades.
India will offer its currency as an option for trade to nations who are experiencing a scarcity of dollars.
Up to 18 nations have previously consented to trade in Indian money.
The Commerce Secretary, Sunil Barthwal, said the government is concentrating on improving the rupee payment system. This came after the announcement of the Foreign Trade Policy (FTP) 2023, which aspires to grow India’s exports to USD 2 trillion by 2030.
Government source subsequently informed reporters that Sri Lanka, Bangladesh, and Egypt are experiencing a scarcity of dollars. They have expressed interest in trading in Indian rupees. Last year, Sri Lanka’s debt default was partially caused by a lack of dollars. Bangladesh also borrowed money from the IMF to boost its own reserves.
With as many as 18 nations, India has an agreement in place to settle trade agreements in rupee. It will be carried through 30 separate rupee bank accounts. In order to facilitate the movement of the rupee abroad, the RBI has also permitted various Indian banks, notably HDFC Bank and UCO Bank, to establish unique rupee vostro accounts tie-ups with 30 foreign banks.
The Ministry of Foreign Affairs stated on Saturday that India and Malaysia have signed a major deal. It would allow the two countries to settle commerce in Indian rupees. Meanwhile, adjustments to the FTP have been made to facilitate international trade settlement in Indian rupees, with the goal of making INR a worldwide currency.
The government has invited trade organisations and banks to look into chances to trade in rupees with other countries. Indian banks have created special rupee vostro accounts with banks from throughout the world. It will put the rupee trade arrangement into action. Gazprom, a Russian bank with no presence in India, has also established an account with Kolkata-based UCO Bank.
The decision to create the special vostro account paved the way for rupee payments to be settled for commerce between India and Russia, allowing for cross-border trading in the Indian currency. To assist popularise the new structure, the RBI has also authorised the special vostro accounts to invest the surplus balance in Indian government securities.