To promote greater use of the rupee in international trade, India has removed a key regulatory hurdle. Now exporters can take payment in Indian currency while maintaining the incentives available under the country's foreign trade policy. This is an additional payment method in addition to the existing system based on freely convertible currencies.
The Directorate General of Foreign Trade (DGFT) in a notification made changes in the Foreign Trade Policy (FTP) 2023 with immediate effect. Under this, the rules related to export invoicing and recovery of payment have been made in line with the existing foreign exchange rules of the Reserve Bank of India (RBI).
This step has been taken at a time when US President Donald Trump has warned the BRICS countries against steps that 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 clearly rejected the idea of a common BRICS currency. Commerce and Industry Minister Piyush Goyal had said earlier this month that India does not support any such plan.
India says that the internationalization of the rupee means increasing the use of its domestic currency in global trade, and not changing 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 Testament say?
Under the new foreign trade policy rules, for countries outside the Asian Clearing Union (ACU) regional payment system, exporters can now conclude contracts and invoices in Indian rupees or foreign currencies, and export payments are also allowed in any currency. More importantly, exports made to any country other than Nepal and Bhutan, where payment is made in rupees through approved banking channels, will be eligible for FTP benefits and will be counted towards fulfilling the export criteria like exports made in foreign currency. In the case of Iran, the notification maintains the existing safeguards for trading in the rupee. It stipulates compliance with the FTP rules, which apply to certain sensitive items and technologies subject to India's international non-proliferation commitments.
It started in 2022
This change essentially completes the regulatory process that started 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 SRVA with foreign correspondent banks and, in October 2025, allowed the balance in such accounts to be invested in specified Indian corporate debt instruments. However, in the absence of amendments to the FTP, exporters were unsure whether such receipts would be eligible for FTP incentives or would be counted towards meeting export criteria. DGFT's amendment removes that uncertainty by treating eligible rupee receipts at par with foreign currency earnings.
Can be beneficial with these countries
This change could be particularly beneficial for trade with countries that are short of dollars or that have difficulty accessing established international payment systems. Settlement in rupees can also reduce the cost of currency conversion and provide exporters and foreign buyers an alternative to doing every transaction in US dollars. However, this notification alone is unlikely to lead to a rapid increase in rupee trade.
Ajay Srivastava, founder of Global Trade Research Initiative, said that DGFT's notification removes uncertainty and keeps the eligible export earnings in rupees at par with the earnings in foreign currency. He further said that but regulatory approval alone will not allow trading in rupees on a large scale. Foreign buyers need easy access to rupees, and foreign banks need practical options to access, invest, exchange or repatriate their balances.
The need for forex reserves will be less
He said India now needs a country-specific settlement system, easy banking processes, cheap hedging, rupee-based export credit and ECGC protection. Without this support system, invoicing in rupees would probably remain just a utility and not a widely used business option. Invoicing and settling international trade transactions in rupees with trading partners with which India has a trade deficit (such as oil exporting countries) will generally reduce the current account deficit in convertible currencies, the RBI said in a 2023 report on the internationalization of the rupee. Additionally, there will be less need to maintain large forex reserves in convertible currencies, it said.