RBI has been pushing the rupee-based trade settlement since July this year by creating an overarching framework for it, as part of its efforts in the process of “internationalizing” the rupee.
“The increased use of the rupee in cross-border transactions requires a unified global rupee market, both in terms of interest rates and currencies. Such a unification would not only improve the depth and liquidity of our markets, but it would also facilitate uniform pricing across borders,” he said. Thursday during the annual Foreign Exchange Dealers Association of India (FEDAI) day in Mumbai.
It should be noted that invoicing of exports and imports in rupees has long been allowed, but has been used for limited purposes all these years.
The Deputy Governor distinguished between the status of the “rupee as an international currency” and the process of “internationalization” of the local currency. “The Rupee as an international currency, with all the privileges that come with it which we have seen the USD, is a state that is well into the future. It is not achievable by financial regulation alone,” said he added.
“But we can make tangible progress towards the internationalization of the rupee. It is a process that involves increasing use of the rupee in cross-border transactions. Basically, the process is to promote the rupee for import trade and export, then other current account transactions followed by its use in capital account transactions,” he said.