Government Streamlines Export Rules to Boost Global Use of Indian Rupee
NEW DELHI: In a significant move to bolster the international footprint of the domestic currency, the Indian government on Thursday announced amendments to the Foreign Trade Policy (FTP), simplifying the process for exporters to invoice international transactions and receive payments in Indian rupees (INR).
The Directorate General of Foreign Trade (DGFT) issued a notification confirming that, with the exception of transactions involving member countries of the Asian Clearing Union (ACU), all export contracts and invoices may now be denominated in either foreign currency or Indian rupees. Furthermore, export proceeds can be realized in either format, providing greater flexibility for businesses engaged in cross-border trade.
The ACU, which comprises 11 nations—including most SAARC countries, Belarus, Iran, and Mauritius—remains subject to specific existing regulations.
Enhancing Trade Competitiveness
The updated policy stipulates that exports to any country—excluding Nepal and Bhutan—where proceeds are realized in Indian rupees via authorized banking channels, will now be eligible for the same export benefits and fulfillment of export obligations as those denominated in foreign currencies. For exports to Iran, the government continues to maintain additional specific policy prescriptions.
This move marks a concerted effort by the government and the Reserve Bank of India (RBI) to internationalize the rupee. By easing these requirements, officials hope to reduce the dependency on the US dollar and other foreign currencies for trade settlements.
Industry Perspective and Challenges
The Global Trade Research Initiative (GTRI) noted that the DGFT’s amendment effectively aligns the Foreign Trade Policy with the RBI’s 2023 foreign exchange regulations. According to the think tank, the shift could help lower currency conversion costs and provide a viable lifeline for trade with nations currently grappling with acute dollar shortages.
However, industry experts remain cautious regarding the practical adoption of these measures. "The notification removes an important regulatory barrier but does not resolve the commercial difficulties surrounding rupee trade," the GTRI stated. "Foreign buyers often struggle to obtain rupees, while overseas banks may hesitate to hold large rupee balances because the currency is not yet fully convertible."
Path Toward Commercial Viability
Addressing the structural requirements for this transition, RBI Deputy Governor Rohit Jain emphasized that the success of the rupee settlement mechanism—facilitated through special rupee vostro accounts—depends on several market factors.
"Success will hinge on commercial viability, robust two-way trade corridors, strong correspondent banking ties, market-based rates, and competitive conversion and hedging options," Jain said. He further urged banks to play an active role by guiding first-time users, deploying rupee balances productively, and strengthening operational resilience and anti-money laundering (AML) controls.
As the government continues to incentivize this transition, the government makes it easier for exporters to get paid in rupee, aiming to transform the currency into a preferred medium for international settlement over the long term.
