In a major push for wider use of rupee in international trade, India has removed a key regulatory hurdle by allowing exporters to receive payments in Indian currency while retaining incentives under the country’s foreign trade policy.
It is an additional payment mechanism to the existing system based on freely convertible currencies.
The Directorate General of Foreign Trade (DGFT), in a notification issued on Wednesday, amended the Foreign Trade Policy (FTP) 2023 with immediate effect, aligning rules on export invoicing and realisation with the Reserve Bank of India’s existing foreign exchange regulations.
The move comes against the backdrop of US President Donald Trump warning Brics countries against moves to challenge the dollar, including the creation of an alternative currency. He had also previously threatened punitive tariffs against countries backing such efforts.
India, however, has explicitly rejected the idea of a common Brics currency. Commerce and Industry Minister Piyush Goyal said earlier this month that India does not support such a scheme. India has maintained that rupee internationalisation is about expanding the use of its domestic currency in global trade rather than replacing existing foreign currency arrangements.
The dollar-based international financial system has also made countries like Russia vulnerable to sanctions by the West.
Under the new foreign trade policy norms, for countries outside the regional payment arrangement of Asian Clearing Union (ACU), exporters can now set contracts and invoices in either Indian rupees or foreign currency, with export payments also allowed in either currency.
More importantly, exports to any country other than Nepal and Bhutan for which proceeds are realised in rupees through approved banking channels will qualify for FTP benefits and count towards fulfilment of export obligations on par with exports realised in foreign currency. For Iran, the notification retains existing safeguards for rupee trade, referring to the FTP compliance requirement which governs specified sensitive goods and technologies linked to India’s international non-proliferation commitments.
The change effectively completes a regulatory process that began in July 2022, when the RBI introduced a mechanism allowing international trade to be invoiced and settled in rupees through Special Rupee Vostro Accounts (SRVAs).
The RBI subsequently made it easier for authorised dealer banks to open SRVAs for overseas correspondent banks and, in October 2025, allowed balances in such accounts to be invested in specified Indian corporate debt instruments.
However, in the absence of the FTP amendment, exporters faced uncertainty over whether such receipts would qualify for FTP incentives or count towards export obligations. The DGFT amendment removes that uncertainty by explicitly placing eligible rupee receipts on par with foreign-currency earnings.
The change could be particularly useful for trade with countries that face shortages of dollars or difficulties accessing established international payment systems. Rupee settlement can also reduce currency conversion costs and give exporters and overseas buyers an alternative to settling every transaction in the US dollar.
However, the notification by itself is unlikely to trigger a sharp increase in rupee-denominated trade.
Ajay Srivastava, founder at the Global Trade Research Initiative, said the DGFT notification removes uncertainty and places eligible rupee export receipts on par with foreign-currency earnings.
“But regulatory permission alone will not create large-scale rupee trade. Foreign buyers must be able to obtain rupees easily, while overseas banks need practical options to use, invest, convert or repatriate their balances. India now needs country-specific settlement arrangements, simpler banking procedures, affordable hedging, rupee-based export credit and ECGC protection. Without this supporting system, rupee invoicing may remain a useful facility rather than becoming a widely used trade option,” he added.
Invoicing and settling of international trade transactions in rupee with trade partners with whom India has a trade deficit (say, the oil exporting countries) will in general lead to a reduction in the current account deficit denominated in convertible currencies, RBI said in a 2023 report on internationalisation of the rupee.
Commensurately, there will be a reduced need to maintain large foreign exchange reserves in convertible currencies, it said.