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Informist, Thursday, May 29, 2025

MUMBAI – The Reserve Bank of India will continue to take steps to internationalise the use of the Indian rupee in 2025-26 (Apr-Mar), it said in the annual report for FY25. Amid the rise in "protectionism" across the globe, the central bank aims to promote the use of the Indian rupee for cross-border transactions by increasing its accessibility and acceptability.

"Use of local currencies for cross-border transactions with trade-partner countries are expected to continue during the year as reflected in memoranda of understanding towards local currency settlement signed with Maldives and Mauritius in November and March, respectively," the report said. 

The RBI will continue to collaborate with other countries bilaterally and on multilateral levels to internationalise domestic payment systems, which is a key priority area for the central bank. The central bank is also exploring the use of central bank digital currency pilots on cross-border payments, both on a bilateral and multilateral basis, to overcome challenges related to turnaround time, efficiency and transparency, the report said. To allow for a more inclusive payments ecosystem, the central bank will conduct a survey on the usage of digital payments. The survey will support evidence-based decision-making in this domain, it said in the report. 

The central bank has initiated a comprehensive set of measures to provide rupee liquidity to facilitate its use in cross-border payments. The central bank said there has been an increase in trade settlement using the Indian rupee as the nation entered into local currency settlement arrangements with a few countries.

"The Reserve Bank is committed towards the goal of taking Unified Payments Interface to 20 countries with a completion timeline of 2028-29 and has been facilitating the global outreach of expanding the footprint of UPI as well as the RuPay cards," the report said. The RBI has joined Project Nexus under which it is actively collaborating with other countries on interlinking of fast payment system, it said. 

Project Nexus aims to connect domestic instant payment systems to improve the speed, cost, transparency and access to cross-border payments, according to the Bank for International Settlements. India joined Project Nexus in June 2024. The project is yet to go live.

To support the use of domestic currencies by members of the Asian Clearing Union, the RBI conducted an international workshop, resulting in the board of the Union giving an in-principle approval to the inclusion of domestic currencies as settlement currencies under the Asian Clearing Union mechanism. "The operational mechanism for the use of domestic currencies in the Asian Clearing Union mechanism is being deliberated," the report said.

Asian Clearing Union, which was established in December 1974, is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis. Apart from the RBI, other central banks that are members of the Asian Clearing Union are Bangladesh Bank, National Bank of the Republic of Belarus, Royal Monetary Authority of Bhutan, Central Bank of the Islamic Republic of Iran, Maldives Monetary Authority, Central Bank of Myanmar, Nepal Rastra Bank, State Bank of Pakistan, and Central Bank of Sri Lanka.

Noting that the primary challenge with the speed of cross-border payments is experienced by beneficiaries, the RBI set out an agenda to identify hindrances in processing such. It will also frame suitable regulatory policies in consultation with relevant stakeholders in India, the report said.

To accelerate the internationalisation of the Indian rupee, the central bank developed a Global Structured Financial Messaging System Hub. "This may help India in promoting self-reliance in technology infrastructure," the report said. This hub can be used by interested countries to connect with their local messaging system for sending or receiving financial messages in their local currencies. The RBI is currently in discussions with countries who expressed their willingness to connect with the hub, the report said.  End

US$1 = INR 85.41

Reported by Sourabh Kumar

Edited by Tanima Banerjee

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