Is India ditching the dollar? RBI allows full rupee settlements for BRICS - A silent coup for the INR
The central bank of India has quietly opened the door for BRICS and other partner countries to settle trade entirely in rupees, no longer forcing them to use the US dollar as the default settlement currency. The Reserve Bank of India has issued a directive to allow banks to permit foreign companies to open Vostro accounts without prior approval from the RBI, so exporters and importers can transact directly in INR.
Why this matters:
Practical change, big signal. Making rupee settlements between banks easier removes a key operational hurdle for cross-border trade in INR and could accelerate the international use of the rupee.
Geopolitical context. This move follows new US tariffs on India and is widely seen as part economic strategy, part diplomatic response - by reducing dependence on the USD, India seeks more political space and trade resilience.
How it works: Banks will be allowed to open and manage Vostro accounts for foreign clients (subject to KYC). These accounts enable foreign businesses to hold and move rupees for trade settlement without heavy approvals.
Immediate effects: Easier rupee settlements could increase demand for the INR, add offshore rupee liquidity, and make imports/exports with friendly countries faster and cheaper - potentially pushing some transactions away from the dollar.
Limitations & reality: Practical adoption will take time - infrastructure, correspondent banking, FX liquidity, and trust all need to be developed. Dollar dominance is deep and unlikely to disappear quickly; this is a strategic step, not an instant replacement.
Conclusion:
This RBI notice is a tactical, low-friction move that could accelerate the internationalization of the rupee - particularly through the BRICS and friendly partners. If widely adopted, this is the kind of silent policy change that can slowly erode transactional dependence on the US dollar and reshape regional trade corridors.
Credit: Watcher.Guru - 'India ditches the USD, sends notice to BRICS granting full access to the rupee.'
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