RBI Greenlights Overseas Rupee Accounts to Boost Currency Use

The Reserve Bank of India (RBI) announced on Thursday that it will allow the opening of rupee accounts outside India as part of its strategic plan to internationalize the domestic currency. This move is a key component of the RBI’s 2024-25 agenda, aiming to enhance the global use of the rupee.

In its annual report, the RBI emphasized the continuous alignment of the Foreign Exchange Management Act (FEMA) framework with the evolving macroeconomic environment, with a primary focus on rationalizing various guidelines.

The RBI has also outlined a strategic action plan for 2024-25, which includes the liberalization of the external commercial borrowing (ECB) framework and the launch of phase I of the SPECTRA project, a software platform for ECBs and trade credits reporting and approval.

As part of the internationalization agenda, the RBI will permit persons resident outside India (PROIs) to open rupee (INR) accounts. Additionally, Indian banks will be allowed to lend INR to PROIs, and enable foreign direct investment (FDI) and portfolio investment through special nonresident rupee (SNRR) and special rupee vostro account (SRVA) accounts.

The agenda also includes the rationalization of the Liberalised Remittance Scheme (LRS) and a review of the International Financial Services Centre (IFSC) regulations under FEMA. These measures aim to promote the settlement of bilateral trade in local currencies, further supporting the global use of the INR.

The RBI report highlighted that future liquidity operations will align with the stance of monetary policy, and foreign exchange operations will focus on ensuring orderly movements in the rupee’s exchange rate.