MUMBAI: A Reserve Bank of India (RBI) panel has proposed permitting non-residents to open rupee accounts, waiver of withholding tax for Masala bonds and creating a five-day round-the-clock global rupee market among some of the measures for internationalisation of the rupee.
The panel has recommended the inclusion of Indian government bonds in global bond indices and the expansion of the RTGS (Real Time Gross Settlement) system for settling international transactions to increase acceptance of Indian currency, globally.
The recommendations, including several short-term and long-term measures, have come at a time when India is trying to promote rupees to settle transactions with its trade partners. The Inter-Departmental Group (IDG), formed in 2021 and headed by RBI executive director R S Ratho, has recommended efforts should be made for the inclusion of the rupee in IMF’s Special Drawing Rights (SDR) basket.
“The IDG feels that over the long term, India will achieve a higher level of trade linkages with other countries and improved macro-economic parameters and INR (Indian Rupee) may ascend to a level where it would be widely used and preferred by other economies as a ‘vehicle currency’. The IDG recommends in the long run efforts should be made for inclusion of INR in IMF’s SDR basket,” noted the report. SDR is an international reserve asset created by IMF to supplement official reserves of its member countries.“IDG feels INR has potential to become global currency as India is one of the fastest growing nations and has shown resilience even in the face of headwinds,” said the report.
In its short-term measures, the panel said, there is a need to design a template and adopt a standardised approach for examining the proposals on bilateral and multilateral trade arrangements for invoicing, settlement and payment in INR and encouraging the opening of INR accounts for non-residents (other than nostro accounts of overseas banks) both in India and outside India.
Govt push to boost trade in Indian rupee
Encourage the opening of rupee accounts for non-residents in India and outside
Integrate payment systems with other countries for cross-border transactions
Foster a five-day round-the-clock global rupee market
Review taxes on bonds issued outside India but denominated in rupees, also known as masala bonds
Enable the rupee as an additional settlement currency in multilateral mechanisms such as Asian Clearing Union