Reserve Bank of India (RBI) in its Annual Report for 2023-24 highlightedAction Plan for promoting internationalisation of INR, i.e.
- Permitting opening of INR account outside India by persons resident outside India (PROI);
- INR lending by Indian banks to PROI; and
- Enabling Foreign Direct Investment and Portfolio Investment through Special Non-Resident Rupee (SNRR) and Special Rupee Vostro Account (SRVA).
Internationalisation of Rupee
- It refers to use of rupee in cross-border transactions.
- To be accepted as an International currency, INR should be widely used in International transactions, easily convertible and country should have a stable financial market.
Benefits of Internationalisation of Rupee
- Reduces dollar demand and strengthens INR.
- Reduces cost of doing business and improves their competitiveness.
- Reduced need for holding foreign exchange reserves.
- Reduced Vulnerability to External Shocks.
Challenges in Internationalisation of Rupee
- INR is not fully convertible.
- Triffin dilemma i.e. Obligation of country to supply its currency to meet global demand can conflict with its domestic monetary policies.
- Integration of financial markets could affect macroeconomic stability.
Steps taken for Internationalization of Rupee
- Usage of Indian payment infrastructure in foreign countries like Singapore, Malaysia etc.
- Bilateral Currency Swap agreements with countries like Japan, Sri Lanka, Bhutan etc.
- Issuance of rupee-denominated bonds i.e. Masala bonds.
SNRR Account
SRVA Account
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