A review of existing regulations issued under Foreign Exchange Management Act (FEMA), 1999 has been undertaken by RBI for promoting cross border transactions in Indian Rupee (Internationalization of Rupee).
Recent Changes made in FEMA regulations by RBI:
- People residing outside of India will be able to
- Open INR accounts in overseas branches of Authorized Dealer banks for settling all permissible current and capital account transactions with a person resident in India.
- Settle transactions with other persons resident outside India using balances in their repatriable INR accounts such as SNRR account and SVRAs.
- Use their balances held in repatriable INR accounts for foreign investment.
- Indian exporters will be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.
Internationalization of Rupee
- Internationalization is a process that involves increasing the use of the rupee in cross-border transactions.
- It involves promoting rupee for import and export trade and then other current account transactions, followed by its use in capital account transactions .
Benefits of the Internationalization of Rupee
- Greater Financial independence and protection from external shock as well.
- Efficient cross border trade, Reduces dollar demand and strengthens INR.
- Reduced requirement of foreign reserves to cope up with the external shocks.
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