Internationalisation of the Indian Rupee

Current Context : The Reserve Bank of India (RBI) is seeking government approval to allow domestic banks to lend Indian rupees to overseas borrowers, particularly in neighbouring countries like Bangladesh, Bhutan, Nepal, and Sri Lanka.

Objective

• Promote use of INR in international trade & settlements
• Reduce dependence on foreign currencies
• Strengthen India’s position in global finance

Key Proposal

• Eligible Banks: Domestic banks & their overseas branches
• Target Borrowers: Non-residents, starting with countries like Bangladesh, Bhutan, Nepal, Sri Lanka

Trade Context

• India’s Exports to South Asia (2024–25): ~$25 billion
• 90% of Exports directed to: Bangladesh, Bhutan, Nepal, Sri Lanka
• Opportunity: INR lending could ease bilateral trade & reduce forex burden