Source: ET
Context:
The Reserve Bank of India (RBI) is taking steps to expand rupee-based trade settlement mechanisms with major trading partners to promote rupee internationalisation and reduce dependence on the US dollar.
About the Initiative:
- The RBI is working on establishing direct rupee reference rates against currencies of key partner countries such as the UAE dirham and Indonesian rupiah.
- This will eliminate the need for a third-currency reference (like the dollar), making transactions more efficient and less volatile.
- The initiative is aligned with India’s broader goal of strengthening the rupee’s global standing and enhancing ease of trade settlements.
Background:
- India currently maintains daily rupee reference rates for USD, EUR, GBP, and JPY.
- The new reference rate framework will extend to currencies of trade partners in the Gulf, ASEAN region, and Mauritius.
- The effort supports the Rupee Trade Settlement System (RTS) introduced in July 2022, allowing foreign trade invoicing and payments in Indian rupees.
Objective:
- To promote rupee internationalisation and reduce reliance on the US dollar.
- To cut transaction costs, mitigate currency risks, and make trade settlements faster.
- To support India’s ambition of becoming a global economic powerhouse by 2047.
Key Partner Countries (Proposed Expansion):
- United Arab Emirates (UAE)
- Indonesia
- Mauritius
- Other ASEAN and Gulf nations
