RBI to liberalise norms for NRIs to boost internationalisation of the INR

RBI highlighted the efforts in December to advance the internationalisation of the rupee. This was achieved through the introduction of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, aimed at streamlining norms.

  • Last Updated : May 17, 2024, 14:11 IST
मिनिमम अकाउंट बैलेंस

Taking the Indian Rupee to the global stage is one of the top items on the economic wish list of the Centre and the Reserve Bank of India is going to take steps towards that goal by introducing regulatory changes for non-residents, while taking steps to bolster the GIFT City’s appeal vis-à-vis other international financial centres.

“Efforts are underway towards internationalization of the Indian Rupee (INR) through settlement of bilateral trade in local currency. To promote the internationalization of INR and support local currency settlement with partner countries, it is necessary to liberalize the regulations relating to INR accounts for non-residents,” RBI officials wrote in the central bank’s annual report for 2023-24.

In keeping with that goal, the Foreign Exchange Management (Deposit) Regulations governing rupee accounts for non-resident Indians are being reviewed, The Economic Times has reported.

To push towards that goal, the RBI has taken up three items on its agenda for this year. These are: one, allowing persons resident outside India (PROIs) to open rupee accounts outside India, two, allowing rupee lending by Indian banks to PROIs and three, enabling of foreign direct investment and foreign portfolio investment through special non-resident rupee and special rupee Vostro accounts.

RBI officials emphasized that in December last year they took strides towards internationalization of the INR through the issuance of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, which brought in rationalized norms.

Receipt or payment in any foreign currency that would help in local currency settlement with partner countries is one of the amendments. Another key development is the facilitation of rupee settlement for all Asian Currency Union (ACU) countries with regard to non-trade related transactions as well as trade-related transactions in compliance with RBI directions, said the bank’s officials. Earlier regulations permitted receipt or payment in rupees for all cross border transactions – current and capital – for all non-ACU countries whereas such receipts or payments were not allowed for some ACU countries such as Bangladesh, Myanmar, Pakistan and Maldives.

“To simplify the existing regulatory framework for trade transactions by moving towards a more principle-based approach, improving ease of doing business, and dispensing with redundant provisions/processes and various approvals, the rationalization/simplification of trade guidelines is under process,” RBI officials mentioned in their annual report.

The central bank has also said that the domestic structured financial messaging system (SFMS) through a global SFMS hub to other countries could accelerate the process of taking the INR to the global stage. “The interested countries can connect their local messaging system to Global SFMS Hub for cross-border payment messaging in their local currencies. This may help India in reducing dependence on other major trading currencies and may help in foreign exchange management,” the RBI said.

GIFT city push

The GIFT City in Gandhinagar can also help in the push, indicated RBI officials. The central bank would encourage the trading of FCY (foreign currency)-INR pairs for different international currencies here. IFSC (International Financial Services Centre) regulations under the Foreign Exchange Management Act (FEMA) could be reviewed too. A review of compounding proceedings rules under the FEMA, rationalization of the Liberalized Remittance Scheme and rationalization of inward remittance schemes comprise the other steps being contemplated.

Among the inward remittance schemes feature the Money Transfer Service Scheme and the Rupee Drawing Arrangement.

Published: May 31, 2024, 14:15 IST
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