Chennai: The Directorate General of Foreign Trade has eased rupee trade norms, allowing invoicing in Indian rupee to many countries and providing foreign trade policy benefits to rupee trade.
As Per the DGFT notification, all export invoices can be denominated in either Indian rupee or any foreign currency for all exports to countries outside the Asian Clearing Union (ACU). Export payments also can be received in foreign currency or rupee. Earlier, export proceeds were realized only in freely convertible currency.
Further, eligible rupee payments for exports to any country other than Nepal and Bhutan will now qualify for Foreign Trade Policy benefits and incentives at par with exports realized in any foreign currency. Rupee earnings received through approved banking channels will therefore be treated on par with export payments received in foreign currency.
Export contracts involving ACU countries, other than Nepal and Bhutan, shall be denominated in a currency determined by the ACU. ACU countries include Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka. Export contracts involving Nepal and Bhutan shall be denominated in Indian rupee or in accordance with the directions of RBI from time to time.
Exports financed through EXIM Bank or Government of India lines of credit may also be invoiced in Indian rupees.
“Earlier, exporters receiving rupee payments through an RBI-approved banking channel were not always certain whether such receipts would qualify for FTP benefits or count towards their export obligations. The new rules remove this uncertainty by placing eligible rupee receipts on par with foreign-currency earnings,” said GTRI.
Rupee settlement may reduce currency-conversion costs and exchange-rate risks for Indian exporters. It could be particularly useful in trade with countries facing dollar shortages or difficulty accessing established international payment systems.
The change may also support wider international use of the rupee by giving Indian exporters and overseas buyers an alternative to settling every transaction in US dollars or another freely convertible currency.
However, rupee trade has its own challenges. Foreign buyers may struggle to obtain rupees, while overseas banks may hesitate to hold large rupee balances because the currency is not fully convertible. Trade imbalances may leave some partner countries with unused rupees. Exchange-rate risks, expensive hedging, complex banking procedures and the continued global preference for the US dollar may further limit acceptance of rupee settlement, finds GTRI.
“India may negotiate practical rupee-settlement agreements with key trading partners and allow wider uses for accumulated rupee balances, including simple options to use, invest, convert or repatriate these funds,” it said.
