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Business Times
26-05-2025
- Business
- Business Times
India's central bank seeks approval for overseas rupee lending: sources
[NEW DELHI] India's central bank is taking another step to internationalise the rupee, seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time, two sources said. The Reserve Bank of India (RBI) has asked the federal government to allow domestic banks and their foreign branches to lend Indian rupees to overseas borrowers to enhance the use and acceptability of the local currency in trade. The proposal, which was sent to the finance ministry last month, suggests lending in rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka, the sources said. If successful, such rupee-denominated lending could be extended to cross-border transactions globally, one of the sources said. According to Ministry of Commerce data, 90 per cent of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly US$25 billion. Currently, foreign branches of Indian banks are restricted to providing loans in foreign currencies and such loans are extended mainly to Indian firms. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The sources declined to be identified as the discussions are confidential. E-mails sent to the Finance Ministry and the RBI requesting comment did not receive a response. The central bank has been taking steps to increase the use of the local currency in global trade and investment. As part of the strategy, RBI recently permitted the opening of rupee accounts for non-residents outside India. Earlier this month, Reuters reported the RBI has sought government approval to remove the cap on foreign banks with so-called vostro accounts buying short-term sovereign debt, to boost rupee-denominated investment and trade. The RBI will open the foreign loans in rupees only for the purpose of trade, the sources said. Currently, rupee liquidity is provided in other countries only through a limited number of government-backed credit lines or bilateral currency swap arrangements. 'The objective is to reduce dependence on such arrangements and instead allow commercial banks to provide rupee liquidity on market terms,' the first source said, citing a communication from the central bank in April. The second source said enabling easier access to rupee-denominated loans will help facilitate trade settlements in rupees and reduce exposure to foreign exchange volatility. The government has received several requests from financial institutions to support strategic projects through rupee-denominated financing, the second source said. India's experience with local currency pacts with the United Arab Emirates, Indonesia, and the Maldives, as well as Special Rupee Vostro Accounts used for trade with Sri Lanka and Bangladesh, has underscored the need to deepen the availability of rupee liquidity, the source said. If implemented, the policy would mark a major step towards integrating the rupee into the global financial system, positioning it as a more widely accepted currency for international trade and investment, the second source added. REUTERS
Business Recorder
26-05-2025
- Business
- Business Recorder
India's central bank seeks approval for overseas rupee lending to neighbours, sources say
NEW DELHI: India's central bank is taking another step to internationalise the rupee, seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time, two sources said. The Reserve Bank of India (RBI) has asked the federal government to allow domestic banks and their foreign branches to lend Indian rupees to overseas borrowers to enhance the use and acceptability of the local currency in trade. The proposal, which was sent to the finance ministry last month, suggests lending in rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka, the sources said. If successful, such rupee-denominated lending could be extended to cross-border transactions globally, one of the sources said. According to Ministry of Commerce data, 90% of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly $25 billion. Currently, foreign branches of Indian banks are restricted to providing loans in foreign currencies and such loans are extended mainly to Indian firms. The sources declined to be identified as the discussions are confidential. Emails sent to the Finance Ministry and the RBI requesting comment did not receive a response. The central bank has been taking steps to increase the use of the local currency in global trade and investment. As part of the strategy, RBI recently permitted the opening of rupee accounts for non-residents outside India. India central bank to transfer record surplus of 2.69 trillion rupees to government for FY25 Earlier this month, Reuters reported the RBI has sought government's approval to remove the cap on foreign banks with so-called vostro accounts buying short-term sovereign debt, to boost rupee-denominated investment and trade. The RBI will open the foreign loans in rupees only for the purpose of trade, the sources said. Currently, rupee liquidity is provided in other countries only through a limited number of government-backed credit lines or bilateral currency swap arrangements. 'The objective is to reduce dependence on such arrangements and instead allow commercial banks to provide rupee liquidity on market terms,' the first source said, citing a communication from the central bank in April. The second source said enabling easier access to rupee-denominated loans will help facilitate trade settlements in rupees and reduce exposure to foreign exchange volatility. The government has received several requests from financial institutions to support strategic projects through rupee-denominated financing, the second source said. India's experience with local currency pacts with the United Arab Emirates, Indonesia, and the Maldives, as well as Special Rupee Vostro Accounts used for trade with Sri Lanka and Bangladesh, has underscored the need to deepen the availability of rupee liquidity, the source said. If implemented, the policy would mark a major step toward integrating the rupee into the global financial system, positioning it as a more widely accepted currency for international trade and investment, the second source added.
Time of India
26-05-2025
- Business
- Time of India
RBI said to be seeking approval for overseas rupee lending to neighbours
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel India's central bank is taking another step to internationalise the rupee , seeking approval to allow domestic banks to lend the currency to overseas borrowers for the first time, two sources Reserve Bank of India (RBI) has asked the federal government to allow domestic banks and their foreign branches to lend Indian rupees to overseas borrowers to enhance the use and acceptability of the local currency in proposal, which was sent to the finance ministry last month, suggests lending in rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka, the sources successful, such rupee-denominated lending could be extended to cross-border transactions globally, one of the sources to Ministry of Commerce data, 90% of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly $25 foreign branches of Indian banks are restricted to providing loans in foreign currencies and such loans are extended mainly to Indian sources declined to be identified as the discussions are confidential. Emails sent to the Finance Ministry and the RBI requesting comment did not receive a central bank has been taking steps to increase the use of the local currency in global trade and part of the strategy, RBI recently permitted the opening of rupee accounts for non-residents outside this month, Reuters reported the RBI has sought government's approval to remove the cap on foreign banks with so-called vostro accounts buying short-term sovereign debt, to boost rupee-denominated investment and RBI will open the foreign loans in rupees only for the purpose of trade, the sources rupee liquidity is provided in other countries only through a limited number of government-backed credit lines or bilateral currency swap arrangements."The objective is to reduce dependence on such arrangements and instead allow commercial banks to provide rupee liquidity on market terms," the first source said, citing a communication from the central bank in second source said enabling easier access to rupee-denominated loans will help facilitate trade settlements in rupees and reduce exposure to foreign exchange government has received several requests from financial institutions to support strategic projects through rupee-denominated financing, the second source experience with local currency pacts with the United Arab Emirates, Indonesia, and the Maldives, as well as Special Rupee Vostro Accounts used for trade with Sri Lanka and Bangladesh, has underscored the need to deepen the availability of rupee liquidity, the source implemented, the policy would mark a major step toward integrating the rupee into the global financial system, positioning it as a more widely accepted currency for international trade and investment, the second source added.
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Business Standard
04-05-2025
- Business
- Business Standard
FIEO urges RBI to share info on banks offering rupee trade to aid exporters
Apex exporters' body FIEO has urged the RBI to publicly share information on banks offering the rupee trade settlement system (SRVA) as lack of awareness is limiting its use. The system simplifies trade and saves foreign exchange, but many exporters do not know where to access it, Federation of Indian Export Organisations (FIEO) President S C Ralhan told PTI. In 2023, the Reserve Bank permitted banks operating in the country to open Special Rupee Vostro Accounts (SRVAs) of partner banks from specified countries as part of efforts to promote bilateral trade in local currencies. This enables exporters and importers to invoice and pay in their respective domestic currencies enabling the development of a bilateral foreign exchange market. This system makes it easier to trade with some countries in rupees instead of dollars or euros, "but many exporters don't even know which banks offer this service, because that information isn't easily available. The RBI should make this public. Better awareness means better use of this good initiative," Ralhan said. He raised the issue among others during his meeting with RBI Governor Sanjay Malhotra last week in Mumbai. He also said there are instances where banks have approved loans for exporters, but only about 35-40 per cent of it is actually used. "Often it's because the process to access these funds is complicated, slow, or unclear. It's like being told you can have a loan, but then being made to jump through so many hoops that you give up. We need to fix this so exporters can actually use the money that's been approved for them," the Ludhiana-based exporter said. On high interest rates, he said that Indian exporters, particularly small and medium ones, should be able to compete fairly with businesses from other countries. "But right now, they are at a disadvantage because borrowing money (credit) is too expensive for them. The credit cost has become more important as the payment period has been extended by buyers facing liquidity challenges," he said, adding that many countries help their exporters with cheaper loans or subsidies. In India, without schemes like interest equalisation (which makes loans cheaper), domestic exporters are struggling to match prices with global competitors. The high cost of borrowing makes products more expensive and less attractive in the international markets. Ralhan sought support of the RBI for immediately rolling out the Interest Equalisation Scheme. He has also flagged that the country's exports are growing but the credit support (loans and financial backing) that exporters need is not growing at the same pace. "The RBI governor responded positively to all our requests and he has assured us to look into all the matters," Ralhan said. India's exports turned positive after four months, recording a marginal 0.7 per cent increase to USD 41.97 billion in March, while overall exports of goods and services touched an all-time high of USD 824.9 billion in the last fiscal despite global economic uncertainties. Cumulatively, during 2024-25 (April-March), the country's exports moved up by 0.08 per cent to USD 437.42 billion. Services shipments have reached an all-time high of USD 387.5 billion in 2024-25. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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Business Standard
02-05-2025
- Business
- Business Standard
RBI seeks 'vostro' accounts investment cap removal to push Rupee trade
India's central bank has sought the government's approval to remove the cap on foreign banks with so-called vostro accounts buying short-term sovereign debt, to boost rupee-denominated investment and trade, according to two sources and a letter seen by Reuters. Vostro accounts are typically held by a domestic bank on behalf of a foreign bank in which trading partners can hold rupee-denominated balances emerging from trade transactions. The Reserve Bank of India (RBI), in 2022, allowed overseas banks to open Special Rupee Vostro Accounts (SRVAs) to settle trade transactions in the rupee as part of its efforts to boost the currency's "internationalisation". The holders of such accounts can invest in Indian government debt without registering as foreign portfolio investors (FPIs), as overseas investors have to. However, the government slapped a limit of using only 30 per cent of account balances to buy securities with residual maturity under one year, including treasury bills. "The restriction was intended to encourage long-term capital flows and ensure financial stability. (But) the 30 per cent limit is a major roadblock for entities looking to use SRVAs, especially for managing short-term liquidity," said one of the sources familiar with the matter. Based on the feedback from vostro account holders, this cap should be removed, the RBI recommended to the federal finance ministry in a letter last month. Although this limit serves as a prudential measure for FPI investments, it is a significant obstacle for SRVA holders as their investments are typically short-term in nature and meant to be used or repatriated quickly, the RBI said. The final decision rests with the ministry. The second source said a targeted relaxation could incentivise broader participation in the SRVA framework and help advance India's goal of "internationalisation" of the rupee. The central bank and the finance ministry did not respond to an email from Reuters seeking comment. The two sources declined to be identified as the discussions are private. The RBI has approved 123 correspondent banks from 30 trading partner countries to open 156 SRVAs with 26 Indian banks to promote bilateral trade in local currencies, a junior trade minister told Parliament earlier this year. The combined balance in all vostro accounts, including SRVAs, was 134.55 billion rupees ($1.60 billion) as of December 2024. In January, the RBI allowed overseas branches of authorised banks to open rupee accounts for anyone residing outside India and looking to settle current and capital account transactions with someone residing in the country. It also allowed Indian exporters to open foreign currency accounts overseas for trade payments.
