RBI Liberalizes Norms for Cross-Border Transactions
The Reserve Bank of India (RBI) announced new liberalized norms on January 16, 2025, aimed at promoting the use of the Indian Rupee and other local currencies for settling cross-border transactions. This move comes amidst the depreciation of the domestic currency, which recently hit a record low of 86.70 per USD.
Key Initiatives
- Memorandum of Understanding (MoU): The RBI has signed MoUs with the central banks of the United Arab Emirates, Indonesia, and Maldives to facilitate cross-border transactions using local currencies, including the Indian Rupee.
- Special Rupee Vostro Account (SRVA): Introduced in July 2022, this arrangement has led to the opening of several SRVAs by foreign banks with Indian banks, enhancing the use of INR for trade transactions.
- Liberalized FEMA Regulations:
- Overseas branches of Authorized Dealer banks can open INR accounts for non-residents for settling permissible transactions with Indian residents.
- Non-residents can settle transactions with other non-residents using balances in repatriable INR accounts like SRVA and Special Non-resident Rupee accounts.
- Balances in these accounts can also be used for foreign investment, including Foreign Direct Investment (FDI), in non-debt instruments.
- Facilitation for Indian Exporters: They can open accounts in any foreign currency overseas to settle trade transactions, receive export proceeds, and pay for imports using these proceeds.
Background
This initiative follows a review of the extant FEMA regulations of 1999 by the RBI, conducted in consultation with the central government, to promote cross-border transactions in INR and local/national currencies.
