RBI Step for Rupee: In view of the increasing interest of the global trading community in the Indian Rupee, the Reserve Bank of India (RBI) has decided to make an additional arrangement for settlement of imports and exports in Rupee. The Reserve Bank of India has directed the banks to make adequate arrangements for the settlement of import-export in Indian currency i.e. Rupee. This is considered to be a big decision, because it will help the country to become financially self-reliant and India’s dependence on the dollar will also be reduced somewhat.
Steps to strengthen Indian Rupee
The central bank has taken this step in view of the increasing interest of the global business community. The Reserve Bank said in a circular that banks would be required to take prior approval from its Foreign Exchange Department before implementing this system. Motilal Oswal Financial Services has said in a report that RBI aims to de-dollarise global trade and the Indian economy.
RBI issued press release
A press release issued by the RBI said, “In order to enhance global trade, keeping in view the emphasis on increasing exports from India and the growing interest of the global business community in the Indian Rupee, it has been decided to undertake bill generation, payment and An additional arrangement should be made for settlement of imports/exports in Rupees.”
This is a welcome initiative
While this sounds like a welcome initiative, we believe that it is a long process and is likely to go on in full swing in decades. Implementation of this process would require extensive consultation with trading partners. The success of this measure will depend on how many of them are willing to do business in Indian Rupees.
This challenge is before RBI
The report said that there is a possibility that if India goes for its import settlement in Indian Rupee (INR), the trading partner may ask for its import settlement in its local currency, which indicates that the RBI should Along with central banks, it has to keep its foreign exchange reserves in multiple currencies.