The Reserve Bank of India (RBI) has said that it is introducing a mechanism to settle international trade in the national currency.
The central bank’s move, which it said was to promote growth of global trade and to support increasing global interest in the rupee, comes amid increasing pressure on the Indian currency in the wake of Russia’s invasion of Ukraine.
Moreover, the move to facilitate trade settlement in rupees could also allow India to bypass certain orders that prevent the use of a global currency such as the US dollar for trade with certain countries. For instance, Russia’s attack on Ukraine has seen several countries impose sanctions on the former, with the US cutting off Russia’s access to the dollar. This has made Indian companies, looking to take advantage of the lower price of Russian commodities, consider alternative modes of payment for imports.
As part of its move today on July 11, the RBI said authorised banks would need to take its permission before instituting the rupee trade settlement mechanism.