New Delhi: The Reserve Bank’s (RBI) measures to promote the internationalisation of the rupee, announced on Wednesday, are aimed at reducing the dominance of the US dollar in India’s global trade and boosting the position of the Indian currency.

The RBI’s permission to dealer banks to extend trade-linked loans in rupees to Bhutan, Nepal, and Sri Lanka reduces local reliance on the US dollar as an intermediary settlement currency. For a debt-ridden country like Sri Lanka, which faced severe dollar shortages during its 2022 financial crisis, rupee-denominated borrowing eases pressure on reserves. For India, it creates a captive demand base for the rupee, according to an article in India Narrative.

The article also states that there will be a need for prudent monitoring, as there is a risk

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