New Delhi, October 1: The Reserve Bank of India (RBI) has proposed several measures to strengthen the Indian rupee’s role in regional trade, aiming to reduce pressure on foreign exchange reserves and keep the current account deficit (CAD) at a comfortable level. As part of these measures, Authorised Dealer (AD) banks in India will be allowed to lend in Indian rupees to non-residents in Bhutan, Nepal, and Sri Lanka for cross-border trade. This step is expected to streamline trade settlements, reduce reliance on third-party currencies, and facilitate smoother INR-based transactions.

The RBI also plans to establish transparent reference rates for the currencies of India’s major trading partners, reported PTI. Publicly available standard rates will help exporters and importers manage currency risk and promote predictable cross-border trade. RBI Repo Rate 2025 Announcement: Reserve Bank of India Keeps Repo Rate Unchanged at 5.5% for 2nd Consecutive Time After MPC Meeting (Watch Video).

Additionally, the RBI aims to expand the use of Special Rupee Vostro Account (SRVA) balances. Currently, SRVAs hold INR funds for foreign banks. Under the new proposal, these balances can be invested in Indian corporate bonds and commercial papers, offering greater flexibility and supporting deeper integration of the rupee in regional trade. RBI Urges Banks To Step Up Efforts To Identify and Return Unclaimed Deposits of Over INR 67,000 Crore to Rightful Owners.

These steps come amid improving macroeconomic conditions. India’s CAD moderated to USD 2.4 billion (0.2% of GDP) in Q1:2025-26, down from USD 8.6 billion (0.9% of GDP) in Q1:2024-25. The moderation was driven by a higher net services surplus and strong remittance inflows, despite an elevated merchandise trade deficit. Robust growth in services exports, particularly in software and business services, and strong remittance receipts are expected to keep the CAD sustainable in 2025-26.

As of September 26, 2025, India’s foreign exchange reserves stood at USD 700.2 billion, sufficient to cover more than 11 months of merchandise imports. By promoting INR-based trade and offering flexible investment avenues for foreign banks, the RBI’s initiatives aim to strengthen India’s external sector resilience while supporting regional economic integration.

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