The Reserve Bank of India (RBI) proposes to permit Banks authorised to deal in foreign exchange (ADs) in India and their overseas branches to lend in Indian Rupees (INR) to persons resident in Bhutan, Nepal, and Sri Lanka, including a bank in these jurisdictions.
The aforementioned move is aimed at promoting the settlement of cross border transactions in Indian Rupee (INR) and local currencies as part of RBI’s overall efforts to internationalise the domestic currency.
In this regard, the central bank noted that it has been progressively liberalising regulations under the Foreign Exchange Management Act.
“To take this initiative further, it is essential that INR liquidity is made available and accessible to residents of other countries.
“As a calibrated step in this direction, it has been decided that AD banks in India and their overseas branches may be permitted to lend in INR to persons resident in Bhutan, Nepal, and Sri Lanka, including a bank in these jurisdictions, to facilitate cross border trade transactions,” RBI said.
According to an inter-departmental group report of the RBI, INR has the potential to become an internationalised currency as India is one of the fastest growing countries and has shown remarkable resilience even in the face of major headwinds.
Further, India has made appreciable progress in terms of capital account convertibility, global value chain integration, setting up of GIFT city, etc.
The higher usage of INR in invoicing and settlement of international trade, as well as in capital account transactions, will give INR a progressively international presence, per the report.
The IDG noted that internationalisation of a currency is also closely interlinked with the nation’s economic progress especially its prominence in global trade.
The measures for promoting internationalisation of INR would involve steps towards parallelly liberalising the capital account, promoting international usage of INR, and strengthening financial markets.
Published on October 1, 2025
