RBI allows foreigners to open rupee accounts in major move (original) (raw)

The Reserve Bank of India (RBI) has allowed overseas branches of banks to open rupee accounts for people residing outside India in the latest move towards the internationalisation of the rupee.

In a notification on its website, RBI said people residing outside India will be able to settle transactions with other persons residing outside of the country using balances in their repatriable rupee accounts such as special non-resident rupee account and special rupee Vostro account (SRVA).

SRVA requires prior RBI approval before opening unlike rupee vostro accounts. Under these new kind of accounts, the settlement through rupees is an additional arrangement to the existing system that uses freely convertible currencies and will work as a complimentary system, reducing dependence on hard (freely convertible) currency, RBI said in a frequently asked questions (FAQs) release on its website on Thursday.

SRVA’s were introduced in July 2022 and several foreign banks have since opened such accounts with banks in India. The RBI has also signed a memorandum of understanding (MoU) with the central banks of the United Arab Emirates, Indonesia and Maldives, to encourage cross-border transactions in local currencies.

With the latest relaxation overseas branches of banks will be able to open rupee accounts for a resident from outside India for settlement of all permissible current account and capital account transactions with a person resident in India.

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People residing outside India will be able to use their balances held in repatriable rupee accounts for foreign investment, including foreign direct investment, in non-debt instruments. Indian exporters will also be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.

In its annual report on Currency and Finance released in July 2024, RBI had listed bilateral or multilateral trade and payments arrangements, special vostro accounts, local currency settlements and bilateral swap arrangements to internationalise the rupee.

The report had suggested that multilateral arrangements like the ones with the Asian Clearing Union (ACU), SAARC Currency Swap Framework, the UPI-PayNow linkage between India and Singapore and bilateral understandings such as with the Central Bank of the UAE could be a way to internationalise the rupee and support liquidity arrangements especially in times of a financial crunch.