The Reserve Bank of India (RBI) announced on Thursday its decision to permit the opening of rupee accounts outside India as part of its strategic plan to globalise the domestic currency.
In its annual report, the central bank emphasised the need to adapt the Foreign Exchange Management Act (FEMA) framework to the changing macroeconomic landscape, with a focus on streamlining guidelines.
The RBI said it has finalised a strategic action plan for 2024-25 and envisaged liberalisation of external commercial borrowing (ECB) framework and 'Go-live' for phase I of software platform for ECBs and trade credits reporting and approval (SPECTRA) project.
Under the plan, Indian banks will be allowed to lend rupees to persons resident outside India (PROIs), facilitating foreign direct investment (FDI) and portfolio investment through special accounts like the Special Nonresident Rupee (SNRR) and Special Rupee Vostro Account (SRVA).
Additionally, the RBI aims to rationalise the Liberalised Remittance Scheme (LRS) and review regulations pertaining to the International Financial Services Centre (IFSC) under FEMA to promote the internationalisation of the rupee.
The report highlighted efforts to enable bilateral trade settlement in local currencies by rationalising regulations. Liquidity operations will align with monetary policy stances, while foreign exchange operations will focus on maintaining stability in the rupee's exchange rate.
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