“INR has potential to become an international currency as India is one of the fastest growing countries and has shown remarkable resilience even in the face of headwinds,” the group led by Ratho wrote in the report. “The higher usage of INR in invoicing and settlement of international trade, as well as in capital account transactions, will give INR a progressively international presence.”
The central bank has allowed 17 banks to settle trade in rupees in 18 countries and 65 vostro accounts have been opened for the purpose, RBI Governor Shaktikanta Das said in May. India’s initial attempts at settling trade with Russia in rupees for crude have floundered with pile up of the currency in banks.
Integrating Indian payments systems with other countries and facilitating the launch of BIS investment pools in rupees are some of the other recommendations, in the report. It also suggested a review of taxation issues in financial markets to harmonize the tax regimes of India and other financial markets.
“INR may ascend to a level where it would be widely used and preferred by other economies as a ‘vehicle currency’,” according to the report. “In the long run, efforts should be made for the inclusion of INR in IMF’s SDR basket.”
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