RBI Seeks Nod for Rupee Loans to Neighbours in Push to Internationalise Currency

In a fresh push towards internationalising the rupee, the Reserve Bank of India (RBI) is seeking approval from the central government on certain measures. New agency Reuters reported that the central bank sought approval from the central government to let domestic banks and their overseas branches extend rupee loans to foreign borrowers.

This move, if approved, would mark the first time Indian lenders are allowed to offer rupee-denominated credit to borrowers abroad—part of a broader effort to boost the global usage and acceptance of the Indian currency, particularly in trade settlements.

Sources told the news agency that the proposal was sent to the finance ministry last month. It suggests lending in rupees to non-residents can begin in neighbouring countries such as Bangladesh, Bhutan, Nepal and Sri Lanka.

One of the sources also asserted that this it turns out to be successful then such rupee-denominated lending could be extended to cross-border transactions globally, said the report.

Ministry of Commerce data shows that 90% of India's exports to South Asia were to these four nations in 2024/25, amounting to nearly $25bn. At present, foreign branches of Indian banks are permitted to extend loans only in foreign currencies, and even these are largely limited to Indian companies operating overseas.

The second source said enabling easier access to rupee-denominated loans will help facilitate trade settlements in rupees and reduce exposure to foreign exchange volatility.

Internalisation of Rupee

The RBI has been constantly working towards the internationalisation of the rupee by bringing regulatory changes. It has recently permitted the opening of rupee accounts for non-residents outside India, as part of the strategy.

In May last year, too, the central bank in its annual report also reiterated "Efforts are underway towards internationalisation of the Indian Rupee (INR) through settlement of bilateral trade in local currency."

It also highlighted the need for promoting the internationalisation of the rupee and supporting local currency settlement with partner countries by liberalising the regulations relating to rupee accounts for non-residents.