An Inter-Departmental Group (IDG), constituted by the Reserve Bank of India (RBI), has suggested that India must continue exploring alternatives to both the USD and the Euro to defend itself against economic sanctions. The group has recommended a host of measures to increase the acceptance of Indian rupee (INR) outside the country's borders.
Among the short-term recommendations, the group has asked the bank to encourage opening of INR accounts for non-residents both in India and outside India as well as integrating Indian payment systems with other countries for cross-border transactions.
“An account in the currency of a resident country in the non-residents’ own jurisdiction allows them to leverage their existing financial relationships and provides them the flexibility to move funds and execute financial transactions in their time zone,” the working group chaired by Radha Shyam Ratho said in the report.
Additional recommendations include allowing banking services in INR outside India through off-shore branches of Indian banks and achieve higher level of trade linkages with other countries so that INR becomes preferred as a “vehicle currency” by other economies.
“The higher usage of INR in invoicing and settlement of international trade, as well as in capital account transactions, will give INR a progressively international presence,” the group emphasized adding that the internationalization will reduce the cost of doing business and reduce need for holding foreign exchange reserves.