NEW DELHI: India on Thursday eased rules on rupee export payments, putting them on par with foreign-currency earnings for trade-policy benefits, aiming to promote wider use of the local currency in global trade.
Here are some details:
The Directorate General of Foreign Trade amended the Foreign Trade Policy with immediate effect, allowing export contracts, invoices and payments with non-Asian Clearing Union (ACU) countries to be denominated and settled in rupee or foreign currencies.
The move removes a hurdle to rupee trade and could help commerce with countries facing dollar shortages, but its wider use will depend on whether foreign firms and banks can obtain and use rupees easily.
Earlier, proceeds generally had to be realised in a freely convertible currency, even though invoices could in some cases be raised in rupees.
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Eligible rupee export receipts, except those involving Nepal and Bhutan, will qualify for trade-policy benefits and count towards exporters' obligations if routed through approved banking channels.
The changes align with the Reserve Bank of India's 2023 foreign-exchange rules permitting broader rupee use in cross-border trade.
For ACU members - Bangladesh, Iran, Maldives, Myanmar, Pakistan and Sri Lanka - contracts must generally use an ACU-determined currency, though RBI directions may also apply. Nepal and Bhutan have separate rules.
The ACU enables members to periodically settle net trade obligations, limiting repeated foreign-exchange transfers.
Ajay Srivastava, founder of the Global Trade Research Initiative, said the notification removes a major regulatory ambiguity but will not alone spur large-scale rupee trade.
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"Regulatory permission alone will not create large-scale rupee trade," he said, citing foreign buyers' difficulty in obtaining rupees and overseas banks' reluctance to hold a non-fully convertible currency.
India needs country-specific settlement deals, simpler banking procedures, affordable hedging, rupee-based export credit and export-credit insurance to make rupee settlement commercially viable, Srivastava said.
