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Rupee Rising: How RBI’s Bold Reforms Aim to Globalise the INR and Reduce Dollar Dependency
In an era of shifting geopolitical power and increased volatility in global finance, India is making a strategic push to reduce its dependence on the US dollar by promoting the Indian rupee (INR) as a viable currency for international trade and finance.
The Reserve Bank of India (RBI) has rolled out a slew of reforms — regulatory, structural, and diplomatic — aimed at internationalising the rupee, enhancing its global acceptance, and enabling smoother cross-border rupee settlement.
In this article, we explore the various measures the RBI has adopted, the challenges it faces, and what this shift could mean for India’s role in the global economy.
Why India Wants to Globalise the Rupee:
Exchange rate risk mitigation:
If trade is invoiced in rupees, Indian exporters and importers can reduce exposure to USD/INR volatility.
Reserve diversification & financial sovereignty:
Reducing reliance on the dollar helps India insulate against external shocks and geopolitical pressures.
Cost savings in trade settlement:
Using the rupee for cross-border transactions avoids the need for costly currency conversion via intermediaries.
Stronger influence in regional finance:
A more globally accepted rupee can boost India’s influence in South Asia and among emerging markets.
However, the path to rupee internationalisation is long and complex — and the RBI sees it as a multi-decade endeavour.
Key Measures Taken by RBI to Promote Rupee Globalisation
Here’s a breakdown of the major reforms and policy steps enacted (or proposed) by the RBI:
Special Rupee Vostro Accounts (SRVAs):
Foreign banks can open rupee-denominated vostro accounts with Indian banks. It enables foreign banks to hold and transact in INR for trade with India.
Easing SRVA approval rules: AD Banks no longer need prior RBI approval to open SRVAs for correspondent banks.
It speeds up rupee-based settlements and simplifies operations.
RBI is now allowing surplus SRVA balances to invest in government securities. Foreign entities maintaining SRVAs can invest rupee surplus in central government securities (with some restrictions). This encourages holding of INR and creates yield-based incentive to retain balances.
Rupee-denominated lending abroad: RBI has proposed allowing Indian banks (and overseas branches) to lend in INR to non-residents, particularly in neighbouring countries (Bhutan, Nepal, Sri Lanka). It facilitates rupee credit flows, reduces need for currency swaps.
Official reference exchange rates & currency corridors: RBI will publish reference rates for partner currencies (e.g. Indonesian rupiah, UAE dirham) to reduce need for “crossing currencies” via USD.
Liberalising Foreign Exchange Regulations (FEMA / Mode of Payment rules): The amendments in 2025 allow non-residents to open INR accounts abroad, use SRVAs/SNRR accounts for capital & current transactions, expand payment modes. This expands scope of rupee use in cross-border transfers and investments.
Reviewing Liberalised Remittance Scheme (LRS): RBI is reviewing outbound remittances rules under LRS to align with rupee internationalisation goals. It nay allow more flexible rupee transactions by individuals.
Managed interventions & FX stability: RBI intervenes in foreign exchange markets to reduce INR volatility and maintain confidence. Stability is essential for global users to trust the rupee.
Digital Rupee / CBDC potential linkages: While RBI’s digital rupee is primarily for domestic transactions, over time cross-border applications may support rupee settlement. This could lower friction in international payments using INR in digital form.
These measures are not isolated; they are part of a strategic action plan by RBI. The 2024–25 plan, for example, explicitly includes permitting INR accounts abroad, enabling rupee lending to persons outside India, and leveraging SRVAs/SNRR accounts in cross-border trade.
Recent Developments (2025) & Momentum Gains
In August 2025, RBC issued Circular No. RBI/2025-26/71 to further ease SRVA rules, removing prior RBI approval for AD banks to open SRVAs.
Also in 2025, RBI allowed the full investment of SRVA surplus in government securities, lifting prior restrictions.
RBI has sought government approval to permit rupee lending by Indian banks to non-residents.
In 2025, foreign banks in 30 countries (with 123 correspondent banks) have been approved to open SRVAs with Indian banks.
India has streamlined foreign exchange rules to promote cross-border trade in local currencies, not just the rupee.
These moves reflect increasing seriousness and urgency in RBI’s approach to rupee internationalisation.
Challenges & Risks on the Path to a Global Rupee
While the RBI’s measures are strong foundational steps, several obstacles remain:
1. Limited convertibility of INR: The rupee is not fully convertible on capital account, which constrains global investors from freely using it.
2. Depth of Indian financial markets: For the rupee to be held widely, India needs deeper, liquid bond/equity markets in global view.
3. Exchange rate volatility: Significant depreciation undermines confidence among international actors.
4. Network effects favoring the US dollar: The USD is entrenched in global trade, finance, reserves — displacing it is a slow process.
5. Regulatory & operational frictions: Foreign banks and counterparties must build infrastructure and trust to handle INR–settlements smoothly.
6. Geopolitical & macro risks: Sanctions, global shocks, commodity price swings can destabilize the INR.
7. Balance of payments & reserve management: India must manage pressure on foreign reserves while promoting outward rupee flows.
Because of these constraints, RBI itself sees rupee internationalisation as a long horizon target — one that may fully mature beyond 2035.
What This Means for India & the Global Economy
Reduced reliance on USD: Over time, trade with partners in rupee or local currency reduces transaction exposure to the dollar.
Stronger regional integration: South Asia and neighbouring economies could increasingly settle in INR, boosting India’s influence.
Capital inflow incentives: Foreign banks and entities holding rupees may prefer to invest in India (e.g. government securities) rather than immediately convert to USD.
Incremental reserve diversification: Some national treasuries may begin to include INR in their reserve holdings (though scale will remain modest initially).
Soft power & financial diplomacy: A successful rupee internationalisation would enhance India’s standing in global financial governance.
Conclusion
The road to a globally accepted rupee is long, gradual, and fraught with structural challenges. Yet, India’s central bank has made bold strides by liberalising the rupee settlement infrastructure, easing regulatory bottlenecks, and pursuing bilateral corridors with partner economies.
While the dollar will remain dominant for a long time, the incremental shifts in rupee internationalisation could, over decades, tilt trade and finance away from total dollar dependence. For India, this is not just an exercise in financial engineering — it is part of a broader narrative of economic sovereignty and global ambition.
Team- Intellex Strategic Consulting Private Limited
www.StartupStreets.com, www.GrowMoreLoans.com, www.GrowMoreFranchisees.com, www.intellexCFO.com, www.CreditMoneyFinance.com
