Countries will be more willing to hold Indian bonds in their foreign exchange reserves once the use of the rupee becomes more prevalent in global financial transactions, Sanjeev Sanyal, member, Economic Advisory Council to the Prime Minister, has said.
"So once that (use of rupee in global transactions) becomes more prevalent, other countries will become more willing to hold our bonds as part of their foreign exchange reserves, we will become part of the International Monetary Fund's (IMF’s) SDR basket and so on and so forth. Then the rupee will become a regular part of the global financial system,” Sanyal told Moneycontrol in an interview.
SDR is an international reserve asset whose value is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen and the British pound sterling.
Sanyal said that India is looking to make the rupee a hard currency over the decade by increasing its use in global transactions, particularly those related to New Delhi.
India’s efforts to internationalise the rupee had “nothing to do with de-dollarization”, he said. The endeavour was to make the rupee a part of the existing list of hard currencies such as the euro, the yen, the Singapore dollar, the British pound, and the renminbi, he added.
Also read: MC Interview: India aims to make rupee a hard currency over next 10 years, says Sanjeev Sanyal
India’s central bank in July 2022 announced a framework to facilitate international trade settlement in rupees to boost sentiment and foreign inflows as well as reduce the country’s dependence on dollar.
Since then, the Reserve Bank of India (RBI) and the government have taken several steps to enhance the global presence of the local currency.
Though the settlement of international trade in Indian rupees is yet to take off in a big way, New Delhi has started forging bilateral agreements with some nations that would involve the rupee as well as the other country's legal tender.
The former principal economic adviser to the finance ministry also mentioned that India’s efforts was not only limited to the rupee but also extended to the country’s digital payments platform - Unified Payments Interface (UPI) and its financial messaging system called Structured Financial Messaging System (SFMS).
After the success of UPI locally, India is pushing to internationalise the home-grown payments system and has signed agreements with countries such as the United Arab Emirates to set up a framework to link their fast payment systems.
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