RBI’S DECISION TO PERMIT CROSS-BORDER TRANSACTIONS IN RUPEES IS A TIMELY ONE.

Experts view the recent announcement by the Reserve Bank of India (RBI) to permit cross-border commerce transactions in rupees as a crucial step toward the internationalization of the rupee.

Earlier in July, the Reserve Bank of India (RBI) urged that banks make further preparations for exports and imports to be invoiced, paid, and settled in rupees. This was done to foster the growth of global commerce, with an emphasis on Indian exports, and to support the rising interest of the world trading community in the native currency.

It is an essential and opportune step toward eventual internationalization. This scenario is a few years to a few decades away, yet the timing of this circular has led many to assume quickly that this is intended to be implemented immediately.

Before adopting rupee invoicing systems, Authorized Dealer (AD) banks would need prior authorization from the Foreign Exchange Department of the RBI. A bank from a partner nation may approach an AD bank in India in order to create a Special INR VOSTRO account. The AD bank will seek clearance for the agreement from the Reserve Bank. Using this approval procedure, the RBI intends to ensure that accounts are created for the appropriate purpose.

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