The Reserve Bank of India (RBI) has proposed a slew of measures to promote wider use of the rupee in cross-border transactions.

As part of the plan to gradually internationalise the domestic currency, the RBI’s new measures include allowing banks to lend in Indian rupees to non-residents from Bhutan, Nepal and Sri Lank for bilateral trade.

The exercise is to make the Indian rupee a stable option for global trade, finance and investment. “We have been making steady progress in this regard,” said RBI Governor Sanjay Malhotra. 

In an effort to globalise the domestic currency, the RBI has proposed three measures. The first is to grant permission to authorised dealer banks to lend in Indian rupees (INR) to non-residents from Bhutan, Nepal and Sri Lanka for cross-border trade transactions. The aim is to deepen trade settlement in Indian rupee with neighbouring economies.

The RBI’s second proposed measure is to establish transparent reference rates for currencies of India's major trading partners to facilitate INR-based transactions.

India plans to expand its rupee reference rate framework beyond the current four currencies, RBI Deputy Governor T Rabi Sankar said in a post-policy press conference. The aim is to reduce reliance on crossing currencies for rate discovery and to support wider international use of the rupee.

“The objective is that you minimise the use of crossing currencies to get rates. That will help both our currency as well as the other currency,” Sankar said. 

The Indonesian Rupiah and the UAE Dirham are a couple of currencies under consideration. “This is a case where the reference rate has to be shown first and the market has to pick up from there. We will have to work out ways of how we arrive at the benchmark, keeping those things in mind,” Sankar said.

The RBI currently publishes reference rates for the US dollar, euro, Japanese yen and sterling.

The RBI’s third measure is to permit wider use of Special Rupee Vostro Account (SRVA) balances by making them eligible for investment in corporate bonds and commercial papers.

In August, foreign investors were allowed by the RBI to invest their surplus vostro balances into central government securities.

SRVA is an account opened by a foreign bank with an Indian bank to facilitate international trade settlements directly in INR. 

These measures are intended to reduce dependence on the US dollar and protect the economy from sudden exchange rate fluctuations and currency crises. They ease pressure on forex and the current account deficit.

India's current account deficit moderated to $2.4 billion (0.2% of GDP) in Q1:2025-26 as compared with $8.6 billion (0.9% of GDP) in Q1:2024-25 due to increased net services surplus and strong remittance receipts despite a higher merchandise trade deficit, Malhotra said.

"During July-August 2025, the merchandise trade deficit continued to remain elevated. Notwithstanding rising global trade uncertainties, India's services exports, driven by software and business services, witnessed robust growth in July-August 2025," he added.

Robust services exports coupled with strong remittance receipts are expected to keep the current account deficit sustainable during 2025-26.

As on 26 September 2025, India's foreign exchange reserves stood at $700.2 billion, sufficient to cover more than 11 months of merchandise imports.

Overall, India's external sector continues to be resilient, and RBI remains confident of meeting external obligations comfortably, Malhotra said.

"Notwithstanding the robust domestic macroeconomic fundamentals, the INR has witnessed some depreciation accompanied by phases of volatility. RBI is keeping a close watch on movements of the INR and will take appropriate steps, as warranted," he added.