RBI allows rupee transactions by non-residents using rupee accounts in India

Reserve Bank of India (RBI) has liberalised the extant Foreign Exchange Management Act (FEMA) 1999, facilitating rupee transactions between non-residents, in a move to boost cross-border trade in Indian rupee.

Accordingly, non-residents can undertake transactions with other non-residents using their rupee accounts in India. Such cross-border rupee transactions by non-residents will support foreign investment and offer flexibility for exporters and importers.

In a significant push to enhance the global usage of the Indian Rupee (INR) and local currencies for cross-border transactions, the Reserve Bank of India (RBI) has liberalised key regulations under the Foreign Exchange Management Act (FEMA), 1999.

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The amended FEMA rules allow overseas branches of authorised foreign exchange dealer banks to open rupee accounts for non-residents, which would facilitate current and capital account transactions with Indian residents, thereby streamlining cross-border settlements.

Also, non-residents can now use balances in their repatriable rupee accounts, including Special Non-resident Rupee Accounts (SNRAs) and SRVAs, to carry out transactions with other non-residents, opening new avenues for rupee-based trade and settlements outside India.

Repatriable rupee accounts can also be used for foreign investments, including foreign direct investment (FDI) in non-debt instruments. This will open a new channel for rupee-based investments in India.

Besides, the amended FEMA allows exporters to open foreign currency accounts overseas, which can be used to receive export proceeds and for paying for imports, thereby enhancing operational flexibility and reducing currency conversion costs.

RBI had, in July 2022, introduced Special Rupee Vostro Accounts (SRVAs), which allowed foreign banks to open rupee accounts with Indian banks.

Further, RBI had entered into memoranda of understanding with counterparts in the UAE, Indonesia, and the Maldives, enabling increased use of local currencies in bilateral transactions.

These measures are aimed at improving the viability of the Indian rupee in international transactions and promoting its use in global trade and are designed to strengthen India’s trade and investment framework by reducing reliance on hard currencies like the US dollar, RBI stated ina release.