RBI Allows Overseas Banks to Open INR Accounts

The RBI has allowed overseas branches of authorized banks to open Indian Rupee (INR) accounts for non-residents, aiming to boost the Rupee’s use in global trade. This move enables easier cross-border transactions, and supports Indian exporters by reducing currency conversion costs.

Piyush Shukla Published On January 18th, 2025

In a significant policy shift, the Reserve Bank of India (RBI) has authorized overseas branches of authorized banks to open Indian Rupee (INR) accounts for non-residents. This initiative aims to bolster the global use of the Indian Rupee in cross-border transactions and investments.

Key Developments

Facilitating Cross-Border Transactions: Non-residents can now utilize balances in their INR accounts to settle transactions with other non-residents, promoting the use of the Indian Rupee in international trade.

Investment Opportunities: Balances in these INR accounts are eligible for foreign investments, including Foreign Direct Investment (FDI) in non-debt instruments, thereby attracting global capital into the Indian economy.

Support for Indian Exporters: Indian exporters are permitted to open accounts overseas to receive export proceeds and utilize these funds for paying for imports, enhancing operational flexibility and reducing currency conversion costs.

Contextualizing the Move

This policy aligns with the RBI’s broader strategy to internationalize the Indian Rupee, reducing reliance on dominant foreign currencies like the US Dollar and strengthening the Rupee’s global standing. The introduction of Special Rupee Vostro Accounts (SRVAs) in July 2022 marked a pivotal step in this direction, allowing foreign banks to maintain INR accounts with Indian banks for settling trade transactions.

Implications

Enhanced Global Trade: By enabling the use of the Indian Rupee in international transactions, the RBI aims to make cross-border trade more efficient and cost-effective.

Attraction of Foreign Investments: The policy is expected to attract foreign investments into India, particularly in sectors open to FDI, by providing a more straightforward mechanism for international investors.

Strengthening the Rupee: Facilitating the use of the Rupee in global markets is anticipated to contribute to its appreciation and stability.

Summary of the news

Why in News	Key Points
RBI allowed overseas branches of authorized banks to open INR accounts for non-residents to boost the use of the Indian Rupee in global trade.	– Objective: To boost the use of INR in international trade.
Non-residents can now use INR accounts for cross-border transactions and investments.	– Impact on Trade: Facilitates easier settlement in INR for non-residents.
Policy aims to reduce reliance on foreign currencies like the US Dollar for global trade and investments.	– Foreign Investments: Expected to attract foreign investments.
Indian exporters can open INR accounts abroad to receive proceeds and make payments for imports, reducing currency conversion costs.	– Exporter Support: Enables cost-effective international trade for Indian exporters.
This move follows the introduction of Special Rupee Vostro Accounts (SRVAs) in 2022, which allowed foreign banks to maintain INR accounts with Indian banks for settling trade transactions.	– Previous Initiative: Special Rupee Vostro Accounts (SRVAs) introduced in 2022.
Relevant Static Points:
– Reserve Bank of India (RBI): India’s central bank.
– FDI (Foreign Direct Investment): Investments from foreign entities into India’s economy.