RBI Inter-Departmental Group (IDG) report on Internationalisation of INR
RBI recently released the report of Inter-Departmental Group (IDG) on internationalisation of INR. The working group has recommended various measures, including inclusion of the rupee in the Special Drawing Rights (SDR) basket and recalibration of the Foreign Portfolio Investor (FPI) regime to accelerate the pace of internationalisation of the rupee. The group was constituted by RBI Deputy Governor T Rabi Sankar to review the position of the rupee as an international currency and to frame a road map for the internationalisation of the domestic currency.
Internationalisation of the rupee is a process that involves increasing use of the local currency in cross-border transactions. The rupee 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. Last year in July, the RBI put in place a mechanism to settle international trade in rupees in order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in the rupee.
Other suggestions include use of the existing bilateral and multilateral payment and settlement mechanisms, such as ACU (Asian Clearing Union), non-residents should be allowed to open rupee account, expanding the footprint of rupee denominated payment mechanism, step up measures for the inclusion of Indian Government Bonds (IGBs) in global bond indices, review of withholding tax for masala bonds issuances, expansion of RTGS (Real Time Gross Settlement) system for settling international transactions and inclusion of the rupee in Continuous Linked Settlement (CLS) system among others.
