India’s central bank has taken fresh steps to expand the international role of the rupee, allowing trade and lending in the currency with Sri Lanka, Nepal and Bhutan.
The Reserve Bank of India (RBI) announced that authorized dealer banks in India and their overseas branches may now extend rupee-denominated loans to residents, businesses, and financial institutions in the three countries for trade and related purposes.
The RBI further broadened the scope of Special Rupee Vostro Accounts — used to facilitate settlement in rupees — permitting balances to be invested in corporate bonds and commercial paper, in addition to government securities.
Officials said the measures are aimed at reducing reliance on the U.S. dollar, lowering conversion costs, and strengthening rupee liquidity in regional transactions. The RBI also plans to publish reference rates for currencies of key trading partners to enhance transparency in rupee settlements.
Analysts described the step as part of India’s long-term push to internationalize the rupee, while noting that its success will depend on the currency’s stability and the willingness of neighboring countries to hold rupee reserves.
