RBI's Measures to Promote Indian Rupee in Cross-Border Trade
Introduction and Key Announcements
On October 1, 2025, the Reserve Bank of India (RBI) announced measures to support the use of the Indian Rupee in international trade. This includes granting permission for Authorised Dealer banks to lend in Indian Rupees to non-residents in Bhutan, Nepal, and Sri Lanka for cross-border transactions.
Details of the Measures
- Authorized Dealer banks can lend in Indian Rupees to non-residents from Bhutan, Nepal, and Sri Lanka for bilateral trade.
- Plans to establish transparent reference rates for currencies of India’s major trading partners.
- Special Rupee Vostro Account (SRVA) balances are eligible for investment in corporate bonds and commercial papers.
Impact and Benefits
- Reduction in dependence on the US dollar, minimizing exposure to exchange rate fluctuations and currency crises.
- Potential easing of pressure on foreign exchange reserves and maintaining a manageable current account deficit.
Current Economic Indicators
- India's current account deficit reduced to $2.4 billion (0.2% of GDP) in Q1 of 2025-26 from $8.6 billion (0.9% of GDP) in Q1 of 2024-25.
- Despite a high merchandise trade deficit, strong services exports and remittances support the current account.
- Foreign exchange reserves as of September 26, 2025, are at $700.2 billion, covering over 11 months of merchandise imports.
RBI's Outlook
The RBI remains confident in addressing external obligations comfortably due to robust macroeconomic fundamentals. The Indian Rupee has experienced some depreciation and volatility, and the RBI is prepared to take necessary actions as needed to stabilize the currency.
