RBI Permits Opening of Rupee Accounts Abroad

The Reserve Bank of India (RBI) has announced its decision to allow persons resident outside India (PROIs) to open rupee (₹) accounts, marking a significant step in the agenda to globalize the domestic currency for the fiscal year 2024-25. This move enables Indian banks to extend rupee-denominated lending to PROIs and supports the RBI’s aim to promote the use of the rupee and other domestic currencies within the Asian Clearing Union (ACU) mechanism.

In its annual report, the RBI outlined its strategic action plan for the fiscal year, emphasizing the liberalization of the external commercial borrowing (ECB) framework and the launch of phase I of the Software Platform for ECBs and Trade Credits Reporting and Approval (SPECTRA) project.

Additionally, the RBI is focused on aligning the Foreign Exchange Management Act (FEMA) operating framework with the evolving macroeconomic landscape and streamlining various guidelines to facilitate the internationalization of the rupee.

Furthermore, the RBI aims to enhance the role of GIFT City in Gandhinagar, Gujarat, to better compete with other international financial centers. The central bank’s initiatives include allowing foreign direct investment (FDI) and portfolio investment through special accounts such as special nonresident rupee (SNRR) and special rupee vostro account (SRVA), as part of efforts to boost the internationalization of the rupee.

The move to internationalize the rupee stems from recommendations made by an RBI-appointed working committee in July 2023, which proposed measures to expedite the process. In response, the RBI took proactive steps, such as facilitating export and import transactions in rupees and allowing banks to open additional current accounts for export earnings alongside special rupee vostro accounts.

Meanwhile, the Indian government has inked agreements with seven countries to integrate the Unified Payments Interface (UPI), enabling Indian nationals to transact in local currency seamlessly.

These developments signal a concerted effort to bolster the global presence and usage of the Indian rupee.