Now The Indian Rupee Is Preparing To Compete With The Dollar And The Pound, The Reserve Bank Has Started This Preparation

Indian Rupee: The Indian rupee may soon be recognized as an international currency like the dollar and the pound. A committee of the Reserve Bank of India made several short-term and long-term suggestions for making the rupee an international currency. These suggestions include inclusion of the Indian rupee in the International Monetary Fund’s Special Drawing Rights (SDR) basket and international use of RTGS (Real Time Gross Settlement) for cross-border business transactions.

Apart from this, it has also been recommended to give reasonable incentives to exporters for trade settlement in rupees. SDRs are international reserve assets created to supplement the official currency reserves of IMF member countries. Cash is provided to the country from the SDR group at times of need. SDRs include US Dollar, Euro, Chinese Yuan, Japanese Yen and British Pound.

This inter-departmental group of the Reserve Bank was formed in December 2021. Its objective was to review the current status of the rupee as an international currency and create a road map for the internationalization of the Indian rupee.

The Inter-Departmental Group (IDG) headed by RBI Executive Director RS Ratho said in its report that the internationalization of the rupee is a process, which requires continuous efforts to build on all the steps taken in the past.

The Committee suggested examining proposals on bilateral and multilateral trade arrangements for billing, settlement and payment in Indian rupees and local currency as short-term measures.

The committee recommended that there is a need to adopt a framework and standardized approach to encourage opening of rupee accounts (other than nostro accounts of foreign banks) by tourists both in India and outside India. Nostro account refers to an account maintained by one bank with another bank in the form of foreign currency.

The committee suggested integration of Indian payment systems with other countries for cross-border transactions and strengthening of financial markets by promoting Indian rupee market which operates 24×7 on all five working days globally. It also recommended promoting India as a hub for rupee transactions and price discovery.