RBI eases rules to step up cross-border rupee payments

The Reserve Bank of India (RBI) has allowed banks to open rupee accounts in their overseas branches for non-residents in a regulatory move aimed at promoting cross-border payments and aiding in the domestic currency’s internationalization.

People residing outside the country will also be allowed to settle all permissible current account and capital account transactions with an Indian resident, the regulator said.

Non-residents can also settle transactions with other non-resident using the balances in their repatriable rupee accounts such as special non-resident rupee account and special rupee vostro account  (SRVA).

SRVAs were introduced in July 2022 to encourage the greater use of rupee for trade transactions. Several foreign banks have since opened SRVAs with banks in India. Such operations need prior RBI approval.

In its statement, RBI said it signed a memorandum of understanding (MoU) with the central banks of the United Arab Emirates, Indonesia and Maldives, to encourage cross-border transactions in local currencies.

In December 2023, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations were revised to enable cross border transactions in all foreign currencies, including local currencies of trading partner countries, and the rupee.

In its statement, RBI said individuals living abroad can now use the balances held in repatriable rupee accounts for foreign investment, including foreign direct investment, in non-debt instruments.

Indian exporters will be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.