India has not yet opened up its capital account fully which will allow free flow of capital to the country and outside.
AdvertisementCapital account convertibility means the freedom to convert rupee into any foreign currency and foreign currency back into rupee for capital account transactions.
It will take steps to enhance India’s global footprint.
AdvertisementMeanwhile, on deepening and universalisation of Digital payment systems domestically and globally, the RBI’s agenda includes plans for the internationalisation of India’s Payment Systems (UPI, RTGS and NEFT) and participation in payment systems linkage projects across countries – bilateral and multilateral.
It has planned to increase the domestic usage of digital payments and phased implementation of Central Bank Digital Currency (e – Rupee).
Gearing up to remain “future-ready for India’s fast-growing economy”, the Reserve Bank of India (RBI) has listed a series of aspirational goals, including capital account liberalisation and internationalisation of the Indian rupee (INR), universalising of digital payment system and globalisation of India’s financial sector in a multi-year timeframe.
The central bank has proposed enabling availability of the rupee to non-residents for facilitating cross-border transactions in the rupee and enhancing accessibility of rupee accounts to persons resident outside India (PROIs). It has proposed adopting a calibrated approach towards interest-bearing Non-Resident Deposits and promoting Indian multi-national corporations (MNCs) and Indian global brands through overseas investments, according to ‘Aspirational Goals for RBI@100 in a Multi-Year Time Frame’ released by the central bank on Friday.
India has not yet opened up its capital account fully which will allow free flow of capital to the country and outside. The rupee was made full float in the trade account during the 1991 reforms initiated by the then government.
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Capital account convertibility means the freedom to convert rupee into any foreign currency and foreign currency back into rupee for capital account transactions. The Tarapore committee had listed several preconditions such as fiscal consolidation, inflation control, low level of non-performing assets, low current account deficit and strengthening of financial markets for achieving capital account liberalisation.
The RBI working group, headed by RBI Executive Director Radha Shyam Ratho, had recently recommended a slew of short to long term measures to accelerate the pace of internationalisation of the rupee.
“As the Reserve Bank approaches its centenary year, RBI@100, it will gear up even more to remain future-ready for India’s fast-growing economy. It will take steps to enhance India’s global footprint. For our journey during the next decade, we have drawn up strategies consisting of policy actions towards positioning the Reserve Bank as a model central bank of the global south,” RBI Governor Shaktikanta Das said on Friday.
“This is not a static document as we are living in a dynamic world. Our endeavour will be to continually update it as may be required,” Das said.
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Meanwhile, on deepening and universalisation of Digital payment systems domestically and globally, the RBI’s agenda includes plans for the internationalisation of India’s Payment Systems (UPI, RTGS and NEFT) and participation in payment systems linkage projects across countries – bilateral and multilateral. It has planned to increase the domestic usage of digital payments and phased implementation of Central Bank Digital Currency (e – Rupee).
On globalisation of India’s financial sector and financial sector reforms, RBI plans expansion of banking domestically in consonance with national growth and positioning 3-5 Indian banks among top 100 global banks in terms of size and operations. It plans to support International Financial Services Centres Authority (IFSCA) to make GIFT City a leading international financial centre.
The RBI has also proposed a review of monetary policy framework to address Balancing price stability, economic growth from an Emerging Market Economy (EME) perspective, refinements in monetary policy communication and spillovers to EMEs from private and public debt overhang in systemically important economies.
On dealing with climate change, the RBI plans guidance for regulated entities (REs) to stress test their asset portfolio to assess impact of climate change and strengthening payment systems’ resilience to climate risks. It also proposed climate risk disclosure norms for Res and inputs to the government for finalising taxonomy on climate risks.
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For the short term, the RBI working group has suggested adoption of a standardised approach for examining the proposals on bilateral and multilateral trade arrangements for invoicing, settlement and payment in the rupee and local currencies, encouraging the opening of the rupee accounts for non-residents both in India and outside India and integrating Indian payment systems with other countries for cross-border transactions. It suggested strengthening the financial market by fostering a global 24×5 rupee market and recalibration of the FPI (foreign portfolio investor) regime.
Over the next two to five years, the RBI group recommended a review of taxes on rupee masala bonds, international use of Real Time Gross Settlement (RTGS) for cross-border trade transactions and inclusion of Indian Government Bonds in global bond indices.
