RBI panel suggests actions to internationalise the rupee

 RBI panel suggests actions to internationalise the rupee

Rabi Sankar, the deputy governor of the RBI, formed the committee to examine the status of the rupee as a global reserve currency and to provide a roadmap for the globalisation of the national currency.

In order to hasten the rate of the rupee's internationalisation, a working group established by the Reserve Bank of India on Wednesday suggested a number of actions, including adding the rupee to the basket of Special Drawing Rights (SDR) and adjusting the foreign portfolio investor (FPI) regime.

The Inter-Departmental Group's (IDG) proposals, which were made under the direction of RBI Executive Director Radha Shyam Ratho, have been made available on the RBI website.

T Rabi Sankar, the deputy governor of the RBI, formed the committee to examine the In order to foster the growing interest of the international trading community in the rupee, as well as to promote expansion of global commerce with a focus on exports from India, the RBI established a system to settle international trade in rupees in July of last year.

Though Sri Lanka recently decided to legally list the rupee as a designated foreign currency, the organisation noted that even though the government has long had rupee agreements with Bhutan and Nepal, doing so bodes well for the gradual internationalisation of the indigenous currency.

The panel proposed include the rupee in the basket of SDRs as one of the long-term strategies to accomplish the internationalisation of the rupee.

status of the rupee as a global reserve currency and to provide a roadmap for the globalisation of the national currency.

The process of internationalising the rupee entails using it more often in international transactions.

The IDG claimed that because India is one of the nations with the greatest rates of economic growth and has displayed amazing fortitude even in the face of significant obstacles

According to the report, increasing the rupee's use in capital account transactions, foreign trade settlement, and invoices will give the home currency a stronger international presence.

In order to foster the growing interest of the international trading community in the rupee, as well as to promote expansion of global commerce with a focus on exports from India, the RBI established a system to settle international trade in rupees in July of last year.

Though Sri Lanka recently decided to legally list the rupee as a designated foreign currency, the organisation noted that even though the government has long had rupee agreements with Bhutan and Nepal, doing so bodes well for the gradual internationalisation of the indigenous currency.

The panel proposed include the rupee in the basket of SDRs as one of the long-term strategies to accomplish the internationalisation of the rupee.

The International Monetary Fund (IMF) designed the SDR as a global reserve asset to augment the official reserves of its member nations. 

A standard approach or similar template should be used to evaluate all proposals involving bilateral and multilateral business agreements/arrangements for invoicing, settlement, and payments in the rupee and regional currencies of opposition countries, local currency development processes and bilateral swaps, the group said in its proposal for short-term actions.

To internationalise the rupee, it was advised to make advantage of the current bilateral as well as multilateral currency exchange and settlement structures, such as ACU (Asian Clearing Union).

The capacity to open accounts outside of the country where the currency is used is a fundamental component of a currency's internationalisation, it was stated, thus non-residents should be permitted to create rupee accounts.

The RBI should consider extending the reach of payment systems denominated in rupees, it was stated. The group recommended that the RBI step up efforts to include Indian Government Bonds (IGBs) in global bond indices and suggested that the FPI regime be rationalised to make it easier for foreign investors to enter the Indian debt markets (both corporate and government).

The committee suggested that the withholding tax on masala bond issuances be reviewed, that the RTGS (Real Time Gross Settlement) system be expanded to settle foreign transactions, and that the rupee be included to the Continuous Linked Settlement (CLS) system.

The report and its suggestions represent the committee's opinions, not the official stance of the RBI.