Reserve Bank of India (RBI)-appointed committee has suggested a host of short-term and long-term measures for internationalisation of Indian rupee, including efforts for inclusion of the Indian currency in IMF’s Special Drawing Rights (SDR) basket. The Inter Departmental Group (IDG) headed by RBI executive director R S Ratho in its report said that internationalisation is a process rather than an event, with continuous efforts to build upon all the initiatives that have been taken in the past. SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries. It is a potential claim on the freely usable currencies of IMF members. As such, SDRs can provide a country with liquidity. A basket of currencies defines the SDR: the US dollar, euro, Chinese yuan, Japanese yen, and the British pound.
Suggesting short-term measures, the panel said there is a need to design a template and adopt a standardised approach for examining the proposals on bilateral and multilateral trade arrangements for invoicing, settlement and payment in INR and local currencies and encourage opening of INR accounts for non-residents (other than nostro accounts of overseas banks) both in India and outside India. It also recommended integrating Indian payment systems with other countries for cross-border transactions and strengthening financial markets by fostering a global 24×5 INR market and promoting India as the hub for INR transactions and price discovery.
It further said there is also a need for recalibrating the FPI regime and rationalizing/harmonizing the extant Know Your Customer (KYC) guidelines and provide equitable incentives to exporters for INR trade settlement. With regard to medium-term strategy, it said there is a need to review taxes on Masala bonds and international use of Real Time Gross Settlement (RTGS) for cross-border trade transactions and inclusion of INR as a direct settlement currency in the Continuous Linked Settlement (CLS) system.
