RBI Eases Framework for International Trade Settlement in Indian Rupees

Introduction

With the circular dated August 5, 2025, the Reserve Bank of India (“RBI”) has brought in a fundamental change in the regulatory structure for the international trade settlement in Indian Rupees (“INR”). This circular being built on the guidelines issued in July 2022, which sought to facilitate the use of the INR for cross-border trade. Under the latest relaxation, Authorised Dealer (“AD”) Category-I banks are being provided with enhanced operational latitude for dealing with cross-border transactions.

Explanation

Under the revised framework, RBI has permitted AD Category-I banks to open Special Rupee Vostro Accounts (“SRVAs”) of overseas correspondent banks without seeking prior approval from the RBI. Earlier, such approvals required direct reference to the central bank, which often prolonged the process.

The change is expected to:

• Streamline the process for facilitating cross-border trade in INR, thereby encouraging exporters and importers to use the domestic currency for settlement.
• Enhance ease of doing business for Indian companies by reducing regulatory hurdles.
• Promote internationalisation of the Indian Rupee, aligning with India’s larger policy objective of reducing dependence on foreign currencies in trade.

It is important to note that this relaxation is issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (FEMA). However, entities must continue to comply with approvals or permissions required under any other applicable law.

Conclusion

The RBI’s decision to allow AD banks to independently open SRVAs marks a progressive step in strengthening India’s financial autonomy in global trade. By simplifying operational procedures, this move will likely accelerate the adoption of INR in cross-border settlements and further India’s vision of positioning the rupee as an internationally accepted currency.