RBI Proposes Rupee Lending To Nepal, Bhutan, Sri Lanka To Boost Cross-Border Trade | Banking and Finance News

RBI Proposes Corporate Bond and CP Investments via SRVA to Deepen Rupee Integration

RBI MPC Meet Outcome: The RBI has proposed allowing banks to lend in Indian rupees to non-residents in Nepal, Bhutan, and Sri Lanka for cross-border trade, aiming to boost rupee-based transactions. It also plans to establish a transparent reference rate for the currencies of India’s major trading partners to facilitate such trade. Additionally, the RBI intends to expand the use of Special Rupee Vostro Account (SRVA) balances by permitting investments in corporate bonds and commercial papers, enhancing flexibility and promoting deeper integration of the rupee in regional trade.

Three Steps are:

• First, permit AD banks to lend in Indian Rupees to non-residents from Bhutan, Nepal and Sri Lanka for cross border trade transactions. Authorized Dealer (AD) banks in India will be allowed to give loans in Indian Rupees directly to businesses or entities in Bhutan, Nepal, and Sri Lanka.
• Second, establish transparent reference rates for currencies of India’s major trading partners to facilitate INR based transactions. India will create standard, publicly available exchange rates for the currencies of countries it trades heavily with.
• Third, permit wider use of SRVA balances by making them eligible for investment in corporate bonds and commercial papers. Special Rupee Vostro Accounts (SRVA) hold INR funds of foreign banks. The proposal is to allow these balances to be invested in Indian corporate bonds and commercial papers.