India Aligns Export Benefits With Rupee Payments to Boost Currency's Global Use

India's government on Thursday announced a key regulatory change allowing exporters to receive the same policy benefits for payments made in Indian rupees (INR) as for those made in foreign currencies, a move aimed at promoting the rupee's use in international trade.

The Directorate General of Foreign Trade (DGFT) amended the country's Foreign Trade Policy, with the changes taking effect immediately. The update removes a significant barrier where export proceeds were generally required to be realized in a freely convertible currency to qualify for government incentives, even if invoicing in rupees was permitted.

Details of the Policy Amendment

Under the new rules, export contracts, invoices, and payments can now be denominated and settled in Indian rupees. To qualify for trade benefits and fulfill export obligations, these rupee-denominated proceeds must be processed through approved banking channels.

This policy shift aligns with foreign exchange regulations introduced by the Reserve Bank of India (RBI) in 2023, which created a broader framework for using the rupee in cross-border transactions. The goal is to reduce reliance on the U.S. dollar and establish the rupee as a viable currency for international trade settlement.

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Scope and Regional Context

The updated policy applies to all countries except for Nepal and Bhutan, which operate under separate bilateral arrangements with India.

For trade with member nations of the Asian Clearing Union (ACU)—which includes Bangladesh, Iran, Maldives, Myanmar, Pakistan, and Sri Lanka—contracts are typically settled in specified ACU currencies. However, the DGFT noted that RBI directives regarding rupee settlements may also apply in these cases. The ACU facilitates the settlement of net trade balances among members to conserve foreign exchange reserves.