In a bid to promote the use of domestic currency for cross-border settlements, the Reserve Bank on Wednesday (October 1, 2025) announced a slew of measures, including allowing banks to lend in Indian Rupees to non-residents from Bhutan, Nepal and Sri Lanka for bilateral trade.

Observing that India has been making steady progress in the use of the Indian Rupee for international trade, RBI Governor Sanjay Malhotra said permission has been granted to Authorised Dealer banks to lend in Indian Rupees to non-residents from Bhutan, Nepal and Sri Lanka for cross-border trade transactions.

RBI MPC meeting updates on October 1, 2025

Besides, he proposed to establish transparent reference rates for currencies of India’s major trading partners to facilitate INR-based transactions.

RBI has permitted wider use of Special Rupee Vostro Account (SRVA) balances by making them eligible for investment in corporate bonds and commercial papers.

SRVA is an account opened by a foreign bank with an Indian bank to facilitate international trade settlements directly in Indian Rupees (INR). These measures will help reduce dependence on the US dollar and thus shield the economy from sudden exchange rate fluctuations and currency crises.

These steps will help reduce pressure on forex and keep the current account deficit at a comfortable level.

India’s current account deficit moderated to $2.4 billion (0.2% of GDP) in Q1:2025-26 as compared with $8.6 billion (0.9% of GDP) in Q1:2024-25 due to increased net services surplus and strong remittance receipts despite a higher merchandise trade deficit, Malhotra said while announcing the fourth monetary policy review.

“During July-August 2025, the merchandise trade deficit continued to remain elevated. Notwithstanding rising global trade uncertainties, India’s services exports, driven by software and business services, witnessed robust growth in July-August 2025,” he said.

Furthermore, he said, robust services exports coupled with strong remittance receipts are expected to keep the current account deficit (CAD) sustainable during 2025-26.

As on September 26, 2025, India’s foreign exchange reserves stood at $700.2 billion, sufficient to cover more than 11 months of merchandise imports.

Overall, India’s external sector continues to be resilient, and RBI remains confident of meeting external obligations comfortably, he said.

“Notwithstanding the robust domestic macroeconomic fundamentals, the INR has witnessed some depreciation accompanied by phases of volatility. RBI is keeping a close watch on movements of the INR and will take appropriate steps, as warranted,” he said.