The Indian government is taking a visionary step to resist dollar aggression and establishing rupee in the world market through bidding of its own monetary form of the rupee. As the dollar is dominating the world economy, many problems are being faced by India. For example, in the recent tussle between Russia and Ukraine, Russia was banned from many international transactions. Russia has died of dependency on the dollar. India also faced challenges to do business with Russia, known as a friend of India. In many other cases as well, this dependency on the dollar is creating challenges for the Indian economy when it comes to world trade equations. Here, India is taking its first step to introduce Rupee in the world market as a medium of conducting bilateral business.
The reason India is eager to establish the rupee in global trade:
In light of the growing interest in the domestic currency among the international trade community, the Reserve Bank of India (RBI) instructed banks to implement additional provisions for export and import transactions in Indian rupees. The Reserve Bank of India (RBI) has taken initiatives to promote the rupee as the preferred currency for international trade in order to encourage exports. The Reserve Bank of India (RBI) instructed banks to set up additional provisions for export and import transactions in Indian rupees last month.
The central bank has put in place the arrangement in order to promote the growth of global trade by reducing the dependence on hard currency. It is further aimed to emphasis on exports from India, and to support the increasing interest of the global trading community in INR.
An increase in exports may help reduce the trade deficit. The Reserve Bank of India (RBI) has enabled exports and imports to be denominated in rupees thus, establishing rupee in world market. This will internationalize the rupee which, in turn, will reduce foreign currency risks for traders and help navigate payment hurdles in trading with Russia. It will also reduce the demand for dollars.
The central bank, in accordance with the minister, has implemented the arrangement to encourage the growing interest of the international trading community in INR. It is also targeted to foster the growth of global trade by reducing the dependence on hard currency.
A rise in exports could aid in closing the trade gap. The Reserve Bank of India (RBI) has permitted rupee-denominated exports and imports. As a result, traders’ exposure to foreign exchange risk would be reduced, and it will be easier to overcome payment barriers while conducting business with Russia. Additionally, it will lessen the need for money.
India’s way to execution:
The ultimate settlement must be made in free foreign exchange, with the exception of Nepal and Bhutan, according to existing foreign exchange legislation, according to A Sakthivel, head of the Federation of Indian Export Organizations. Now, if the RBI gives its approval, the total payment to all nations may be made in Indian rupees.
The action was opportune because several nations in Africa and South America were experiencing severe currency shortages. The government would also need to make clear whether or not current incentives for foreign exchange earners are still available. The dollar has become exceedingly volatile, and various currencies have reached new lows against it, according to bankers, who said that rupee invoicing will lower foreign exchange risks.
The RBI will need to give its approval before banks can implement this method. It has been decided to implement an additional arrangement for invoicing, payment, and settlement of exports/imports in rupee in order to support the growth of international trade with a focus on exports from India and to support the growing interest of the international trading community in the Indian rupee.
The operation:
India and Saudi Arabia have discussed the viability of institutionalizing rupee-riyal transactions and introducing UPI and Rupay cards in the kingdom. The ministerial meeting of the council’s Committee on Economy and Investments was co-chaired by Goyal and Prince Abdulaziz bin Salman Al-Saud, the Saudi Minister for Energy. By adopting the United Payment Interface (UPI) and RuPay credit and debit cards from India, Oman will be the latest nation to use and accept “Made-in-India” payment methods.
An agreement for collaboration in payments and fintech was inked by the Central Bank of Oman (CBO) and the National Payments Corporation of India (NPCI). With this, Oman has joined its neighbors Bahrain, Saudi Arabia, and the United Arab Emirates as the fourth nation in the Middle East to begin using India’s in-house payments system. Middle Eastern countries have joined the list of countries that have either used UPI or are in the process of doing so, including Singapore, Malaysia, Thailand, the Philippines, Vietnam, Cambodia, Hong Kong, Taiwan, South Korea, and Japan.
The NPCI has been working to expand the usage of UPI internationally and has created a separate organization for the purpose called NPCI International. The UK-based PayXpert and the payments organization signed a contract in August to implement the UPI and RuPay card systems there. In total, NPCI International is in discussions for UPI integration with close to 30 nations. In February 2022, Nepal became the first nation to utilize India’s UPI.
Recent developments
Acceptance of India’s UPI in different markets: With Europe being the most recent location to accept India’s payment systems, India has made considerable progress in developing the global network of its digital payment systems like RuPay, UPI (Unified Payments Interface), etc. France, the United Arab Emirates (UAE), Saudi Arabia, Bahrain, Singapore, the Maldives, Bhutan, and Oman are some other nations that have embraced various Indian payment methods. This suggests that Indians will now be able to transact in these nations using UPI, RuPay, etc.
These international collaborations have been made possible by NIPL (NPCI International Payments Limited), which has been forming alliances with various nations to expand the acceptance network for RuPay and UPI, enabling Indian visitors to use these payment methods in their destination country.
In order to deploy RuPay and UPI outside of India, NIPL was established in April 2020 as a fully owned subsidiary of the National Payments Corporation of India (NPCI).
The Advantage of RuPay:
Due to local transaction processing, each transaction’s clearing and settlement costs are reduced. As a result, the transaction cost is reasonable. Being a local system, RuPay is dedicated to creating products and services that are specifically tailored for customers. As transaction and user data for RuPay cards are stored in India, consumer information is kept private. Complete interoperability between various payment methods and goods is guaranteed by the RuPay card. NPCI is exceptionally well positioned to support RuPay cards across these platforms as it presently provides a variety of solutions across platforms, including ATMs, mobile technologies, checks, etc.
The initial success:
The first foreign nation to use UPI as a payment platform was Nepal (establishing rupee in world market). NIPL collaborated with Bengaluru-based Manam Infotech and Nepal’s authorized payment system operator, Gateway Payments Service (GPS). As a digital public benefit, UPI will be implemented in Nepal to provide interoperable real-time P2P and P2M payment transactions.
Bhutan is the first nation to use the UPI standards developed in India for its rapid response (QR) code. Additionally, it is the second nation after Singapore to have merchant locations accept BHIM-UPI. UPI was made available to the Royal Monetary Authority of Bhutan on July 13, 2021. India’s digital payment system, BHIM (Bharat Interface for Money), utilizes UPI, a platform that unifies various bank accounts into a single smartphone application.
In order to increase the acceptance of Indian payment channels throughout Europe and establishing rupee in world market, NIPL has partnered with the European payment services facilitator Worldline. The cooperation will enable merchants’ Point-of-Sale (PoS) systems in Europe to accept UPI payments from Indians using their mobile phones through the Worldline’s QR code-based technology.
Conclusion
Though it’s never an easy task to introduce your own form of currency in a predominant marketplace, the calculative and we’ll measure steps that have been taken by India, is surely showing a ray of hope. India’s early calculations in the initial stage can be declared as a clean hit in this strategy. Besides this, if the rupee becomes the medium of worldwide business for India, the depreciation proportion of the rupee and dollar will also not be this bothersome for the Indian economy. The initial phase of this strategy worked in a really good way and hence, India as well as many countries are looking forward to the next phases as this one step can change many equations in the world of business.
Learn more about RBI’s new system for international trade settlement
