Countries interested in rupee settlement mechanism: RBI deputy governor

RBI has been pushing rupee-based trade settlement since July this year by creating a comprehensive framework for it, as part of its endeavour in the process of ‘internationalisation’ of the rupee.

“Increased use of rupee in cross-border transactions requires a unified global market in rupee both in interest rates and currencies. Such unification would not only improve depth and liquidity of our markets, but they would also facilitate uniform pricing across borders,” he said Thursday at the annual day event of the Foreign Exchange Dealers Association of India (FEDAI) in Mumbai.

Pertinent to note that invoicing export and import in rupees was long permitted, but it was being resorted to for limited uses all these years.

The deputy governor drew a distinction between the status of ‘rupee as an international currency’ and the process of ‘internationalisation’ of the local currency. “Rupee as an international currency, with all its attendant privileges that we saw USD enjoys, is a state that lies well into the future. It is not achievable by financial regulation alone,” he added.

“But we can make tangible progress towards internationalisation of the rupee. This is a process that involves increasing use of the rupee in cross-border transactions. Broadly, the process involves promoting rupee for import and export trade and then other current account transactions followed by its use in capital account transactions,” he said.