Facilitating trade transactions that are invoiced and settled in rupees is an important step to boost its internationalisation. This has been an objective of the Reserve Bank of India (RBI) since July 2022 when it introduced a framework for rupee-rouble trade. In 2023, the RBI and the Central Bank of the UAE established a framework for a local currency system to settle bilateral transactions.
It has entered into similar arrangements with Indonesia, the Maldives, and Mauritius. Recently, amendments were made to the Foreign Trade Policy (FTP) 2023 to make it easier for exporters to invoice their overseas shipments and receive payments in rupees.
Eligible export proceeds in rupees will now qualify for foreign trade policy benefits and count towards export obligations. The benefits are reducing currency conversion costs, improving the competitiveness of Indian exports, supporting efforts towards greater trade facilitation, and reducing transaction frictions.
According to the RBI, the use of rupee in India’s trade is definitely on the rise although the gains are on a low base. The share of rupee-invoiced exports has gone up to 8.8% of the total shipments of goods and software in April-May 2026 from 6.1% in April-May 2025. The share of rupee-invoiced merchandise imports is lower at 5.8% in April-May 2026 from 6.6% a year earlier.
While invoicing refers to the currency in which the trade transaction is denominated, settlement refers to the currency in which the payment is actually made. Rupee-settled imports in fact sharply rose to 8.4% of India’s merchandise imports in April-May 2026 as against 1.6% a year earlier. As most of the rupee trade is with Russia, the proximate factors responsible relate to the surge in India’s purchases of Russian oil due to the temporary sanctions waiver by the US.
Admittedly, it is early days to assess progress in the use of rupee in India’s trade. Besides amendments to the FTP, various other measures must be in place to boost the process, including making the rupee-rouble trading arrangement work better for both India and Russia. The basic problem is that Russia prefers the payment for its oil and other commodities in hard currencies to fund its ongoing war in Ukraine.
As our imports from Russia have risen more rapidly than our exports, Moscow has accumulated a substantial amount of rupees that it has not been able to deploy. This problem remains although the RBI has allowed surplus balances to be invested in government securities, non-convertible debentures, and bonds. The way forward is to have UAE-type local currency arrangements with many other countries to settle bilateral transactions.
Pushing greater rupee internationalisation entails a lot more groundwork. As overseas banking institutions do not hold rupees, they would not be able to provide it to importers. One option in this regard was outlined by experts to FE; notably, to follow what China has done to internationalise the yuan.
The People’s Bank of China — the central bank — maintains swap arrangements with over 40 central banks which allow foreign central banks to provide offshore renminbi liquidity to local banks to finance imports from China without converting through US dollars.
It is a no-brainer that the profile of rupee is bound to grow in tandem with the country’s rise in global trade. Although this is growing, it accounts for only 2.5% of global exports of goods and services. More critical mass is needed for the rupee’s internationalisation.