Rupee needs a bit of push to gain currency in cross-border trade

economictimes.indiatimes.com:

currency swap and trade agreements, easing of rules for foreign portfolio investments in government bonds and permitting rupee accounts outside India could boost acceptance of the local currency for cross-border trade as India seeks broader overseas acceptance for its money. «Sufficient incentives are not present for the settlement of trade transactions in INR… there is a need for a review of the extant FEMA provisions as well as for extending incentives for international trade settlements in INR,» an inter-departmental group of the central bank said in a report.

The report does not in any way reflect the official position of the RBI. Dated October 2022, the report was released on the Reserve Bank of India's (RBI) website on Wednesday.

In July 2022, the RBI put in place additional arrangements for invoicing, payment, and settlement of exports and or imports in rupees through special rupee Vostro accounts amid depreciation in the rupee versus the US dollar and surging prices of dollar-denominated commodities. While banks from 18 countries were allowed to open special Vostro accounts, such transactions however have not accelerated.

RBI Deputy Governor T Rabi Sankar said in April that volumes had not picked up amid teething issues. «It is argued that the bilateral currency swap arrangements may provide a blueprint for reducing the dependence on the US dollar for settling trade transactions,» the report said.

Citing China's approach in using a large number of bilateral swaps and lines of credit to encourage the use of the yuan for global transactions, the report said that a template or standardised approach must be prepared with interested central banks for global currency settlements, swaps or lines of credit. «This may