The dollar's dominance has been dented! The government has given a major boost to the use of the Indian rupee in international trade

RJ Kesari News Desk: To promote greater use of the rupee in international trade, India has removed a key regulatory hurdle. 

Exporters can now accept payments in Indian currency while retaining the incentives provided under the country's foreign trade policy. This is an additional payment method to the existing system based on freely convertible currencies.

In a notification, the Directorate General of Foreign Trade (DGFT) amended the Foreign Trade Policy (FTP) 2023 with immediate effect, 

bringing the rules relating to export invoicing and collection of payments in line with the existing foreign exchange regulations of the Reserve Bank of India.

The move comes as US President Donald Trump has warned BRICS countries against taking steps to challenge the dollar, such as creating an alternative currency. He has previously threatened to impose punitive tariffs against countries that support such efforts.

However, India has categorically rejected the idea of ​​a common BRICS currency. Commerce and Industry Minister Piyush Goyal said earlier this month that India does not support such a plan.

India maintains that internationalizing the rupee is meant to increase the use of its domestic currency in global trade, 

not to replace the existing foreign currency system. The dollar-based international financial system has also made countries like Russia vulnerable to Western sanctions.

What does the new rule say?

Under the new Foreign Trade Policy regulations, exporters to countries outside the Asian Clearing Union (ACU) regional payment system can now settle contracts and invoices in Indian rupees or foreign currencies, and export payments are permitted in any currency. 

More importantly, exports to any country, except Nepal and Bhutan, that are paid in rupees through approved banking channels will be eligible for FTP benefits and will count towards the same export requirements as exports made in foreign currency. 

In the case of Iran, the notification maintains existing safeguards for trade in rupees, subject to compliance with FTP regulations that apply to specific sensitive goods and technologies related to India's international nuclear non-proliferation commitments.

Started in 2022

This change essentially completes a regulatory process that began in July 2022, when the RBI introduced a system to invoice and settle international trade in rupees through Special Rupee Vostro Accounts (SRVAs). 

Subsequently, the RBI made it easier for authorized dealer banks to open SRVAs for foreign correspondent banks and, in October 2025, allowed the balances in such accounts to be invested in specified Indian corporate debt instruments. 

However, due to the lack of an amendment to the FTP, 

exporters were uncertain whether such receipts would be eligible for FTP incentives or would be counted towards fulfilling export requirements. The DGFT amendment removes this uncertainty by treating eligible rupee receipts at par with foreign currency earnings.

It can be beneficial with these countries

This change could be particularly beneficial for trade with countries that face dollar shortages or have difficulty accessing established international payment systems. 

Settlement in rupees could also reduce currency conversion costs and provide exporters and foreign buyers with an alternative option to conducting every transaction in US dollars. However, this notification alone is unlikely to lead to a rapid increase in rupee trade.

Ajay Srivastava, founder of the Global Trade Research Initiative, said the DGFT notification removes uncertainty and equates eligible export earnings in rupees with earnings in foreign currency. 

He added that regulatory approval alone won't lead to large-scale rupee trade. Foreign buyers need easy access to rupees, and foreign banks need viable options to utilize, invest, convert, or repatriate their balances.