De-dollarisation not on the table, says RBI governor on Trump's BRICS tariff threat

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India has not taken any steps towards de-dollarisation and is only looking to de-risk domestic trade from geo-political upheavals, Reserve Bank of India (RBI) governor Shaktikanta Das told mediapersons on December 6.

Das was responding to a question on American president-elect Donald Trump's threat to impose 100 percent tariffs on goods coming in from BRICS nations, including India, if there are attempts made to undermine the dollar as world’s reserve currency.

"So far as India has concerned, there are no steps that India has taken which specifically wants to de-dollarise. All that we have done is that we have permitted opening of VOSTRO accounts and we have entered into agreements with two countries by now to do local-currency denominated trade. That is basically to de-risk Indian trade, dependence on one currency can be problematic due to appreciation or depreciation," Das said.

The central bank governor stressed de-dollarisation was not on the table.

In a post on microblogging site Truth Social, Trump on November 30 asked for a commitment from BRICS countries that they would neither create a new currency nor back any other “to replace the mighty US dollar or, they will face 100-percent tariffs, and should expect to say goodbye to selling into the wonderful US Economy".

BRICS, a group of five key economies —Brazil, Russia, India, China and South Africa — expanded to 10 members from January 1, with Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE) joining the bloc.

Trump's threat was seemingly triggered by to BRICS countries welcoming the use of local currencies between member nations and their trading partners after a meeting in Russia’s Kazan in October.

Though Moscow has pitched an idea for a BRICS currency, Russian President Vladimir Putin has termed it as a long-term prospect and not under active consideration.

Though one of the members pitched a separate currency for BRICS, no decision was taken, Das said.

Unlike the Eurozone, BRICS nations were spread all over. Geographical continuity would have to be factored in before deciding on a separate currency for this multi-nation bloc, he said.

India has been among key nations attempting to boost the use of local currencies to address trade-related disruptions in the world, particularly owing to sanctions and a US dollar reserve crunch in certain countries.

After the RBI announced the setting up of a mechanism to settle global trade in rupees in July 2022, India started exploring this system with Russia soon after the invasion of Ukraine in February of that year due to the sanctions imposed by the US and its allies on Moscow.

Earlier in the day, the RBI left the key repo rate unchanged at 6.5 percent for an eleventh time but cut the cash reserve ratio by 50 basis points to 4 percent.